Loan Amortization Calculator

What an amortization schedule shows

Every instalment on a loan is split in two: part pays the interest that has built up since the last payment, and the rest reduces what you owe. Early on, most of the payment is interest. Later, as the balance falls, the same payment clears far more of the loan. The schedule below shows that shift year by year.

Formula

• Monthly payment = P × i × (1 + i)ⁿ ÷ ((1 + i)ⁿ − 1)
• i = yearly rate ÷ 12 ÷ 100 and n = years × 12
• Interest this month = balance × i, and the rest of the payment comes off the balance

Worked example

A loan of 1,500,000 at 9% over 10 years costs 19,001 a month. Over the full term you repay 2,280,164, of which 780,164 is interest — more than half the amount you borrowed. In year one, 131,066 of interest is paid and only 96,951 comes off the loan; by year ten that is almost exactly reversed.

How to use the amortization calculator

1. Enter the loan, the yearly interest rate and the number of years.
2. Read the monthly payment and the total interest, then look down the schedule to see the balance falling.
3. Try a shorter term to see how much interest it saves — this is usually the single biggest lever on a loan.

Things worth knowing

• A shorter term raises the payment but cuts the interest sharply, because the balance spends less time accruing.
• Paying anything extra goes straight against the balance, so every later interest charge is smaller. Even one extra instalment a year shortens the loan noticeably.
• The figures here cover principal and interest only. Processing fees, insurance and taxes are extra, and a floating rate will move the payment.

Frequently asked questions

What is loan amortization?

It is the way a loan is paid off through equal instalments, each one covering the interest due plus a slice of the balance. The split changes over the term: interest-heavy at first, principal-heavy at the end.

Why is so much of my early payment interest?

Interest is charged on what you still owe, and early on you owe nearly the whole amount. As the balance drops, the interest part of each payment drops with it.

Does paying extra really help?

Yes. Extra money comes off the balance, so every future interest charge is calculated on a smaller number. On a long loan it can save years of payments.