What is an amortization schedule?

An amortization schedule is a detailed table showing each monthly payment broken down into principal and interest portions over the entire life of the loan. Early payments are mostly interest, while later payments are mostly principal. The schedule also shows the remaining loan balance after each payment.

How do extra payments reduce total interest?

Extra payments go directly toward reducing the principal balance. Since interest is calculated on the remaining balance, a lower principal means less interest accrues each month. Even small extra monthly payments can save thousands of dollars in interest and shorten the loan term significantly.

Why do I pay more interest at the beginning of a loan?

Interest is calculated on the outstanding balance, which is highest at the start of the loan. As you make payments and the balance decreases, less of each payment goes toward interest and more goes toward principal. This is why the amortization schedule shows a gradual shift from interest-heavy to principal-heavy payments.

What types of loans use amortization?

Most installment loans use amortization, including mortgages, auto loans, personal loans, and student loans. These loans have fixed payment amounts over a set term. Credit cards and lines of credit, by contrast, use revolving credit and do not follow a fixed amortization schedule.

Amortization Calculator

Calculate your loan payment, total interest, and view a full amortization schedule with extra payments.

Loan Amount ($)

Interest Rate (% p.a.)

Loan Term (years)

Extra Monthly Payment ($)

Monthly Payment

Total Interest

Total Paid

Payoff Date -- Total Payments 0 Interest Saved Time Saved

Amortization Schedule

Month	Payment	Principal	Interest	Extra	Balance

How Loan Amortization Works

Amortization is the process of spreading a loan into a series of fixed monthly payments over the loan term. Each payment covers both the accrued interest and a portion of the principal balance. In the early years, most of each payment goes toward interest because the outstanding balance is large. As the balance decreases, a greater portion of each payment is applied to principal, gradually reducing the debt to zero by the end of the term.

The Power of Extra Payments

Making extra payments beyond the required monthly amount can dramatically reduce the total interest you pay and shorten the loan term. Extra payments go directly toward the principal, which means less interest accrues in subsequent months. For example, adding just $100 per month to a $250,000 30-year mortgage at 6.5% can save over $45,000 in interest and pay off the loan nearly 5 years early.

Reading the Amortization Schedule

The amortization schedule table below shows every monthly payment broken into its components: principal, interest, any extra payment, and the remaining balance. The balance chart provides a visual overview of how quickly your debt decreases over time. If you enter an extra payment amount, the calculator compares your accelerated payoff to the standard schedule and shows exactly how much interest you save.

This calculator works for any fixed-rate installment loan including mortgages, auto loans, personal loans, and student loans. Adjust the inputs to explore different scenarios and find the repayment strategy that best fits your budget.

Formula

PMT = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ − 1]

Where:

PMT = fixed monthly payment
P = principal loan amount
r = monthly interest rate (annual rate ÷ 12)
n = total number of payments

For each payment in the amortization schedule:

Interest portion = remaining balance × r
Principal portion = PMT − interest portion
New balance = remaining balance − principal portion

Example Calculation

Scenario: $200,000 loan at 7% interest for 30 years

Step 1: Monthly rate r = 7% ÷ 12 = 0.005833, n = 360 payments
Step 2: PMT = $200,000 × [0.005833(1.005833)³⁶⁰] / [(1.005833)³⁶⁰ − 1] = $1,330.60
Step 3: Month 1 interest = $200,000 × 0.005833 = $1,166.67
Step 4: Month 1 principal = $1,330.60 − $1,166.67 = $163.93
Result: Monthly payment = $1,330.60 | Total interest over life of loan = $279,016

This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified professional for decisions specific to your situation.