About this calculator
An amortization schedule is the clearest way to see what each mortgage or loan payment is actually made of. Early on, most of the payment is interest. As the balance falls, the split flips and more of every payment goes to principal.
How it works
Each month, interest is charged on the remaining balance and subtracted from the payment. Whatever is left reduces the principal. That recalculation continues until the balance reaches zero. Adding an extra payment accelerates the principal reduction, which is why it saves so much interest.
Frequently asked questions
What is loan amortization?
Amortization is the process of paying a debt in regular installments where each payment covers both the interest accrued since the last payment and a portion of the principal. It produces the gradual reduction of the balance over the loan term.
What is the formula for amortized loan payments?
The payment is M = P · r(1+r)ⁿ / ((1+r)ⁿ − 1). P is the principal, r the periodic interest rate, and n the total number of payments. This holds the payment constant for the entire term.
Why does so little of my early payment go to principal?
In month one, nearly the entire payment covers interest accrued during that month. Principal reduction only becomes significant once the balance has fallen. On a 30-year loan this crossover often happens around year eighteen.
What is negative amortization?
Negative amortization happens when your payment is smaller than the interest you owe, so the shortfall is added to the balance. The loan grows instead of shrinking, which is common with deferred student loans and some adjustable-rate mortgages.
Does the amortization schedule change with extra payments?
Yes. Any extra payment goes entirely toward principal, which lowers the balance sooner and reduces the total interest charged. Even a small monthly extra can cut years and tens of thousands of dollars in interest.
Does paying off a loan early always save money?
Almost always, but check the prepayment penalty clause first. Some loans charge a fee for paying off within the first year or for a specific number of months. After that window, accelerating is a guaranteed win.