Quick answer: An amortization calculator breaks your loan into a year-by-year schedule: monthly payment, how much of each payment is interest vs principal, and the remaining balance.
Last reviewed: October 2026
Key facts
- Builds a full year-by-year amortization schedule.
- Shows the monthly payment, total interest and total paid.
- Early payments are mostly interest; principal share grows over time.
- Payment = P x r(1+r)n / ((1+r)n - 1).
An amortization calculator splits each loan payment into interest and principal over the life of the loan. This free amortization calculator shows your monthly payment, total interest, and a year-by-year schedule table.
Enter the loan amount, annual rate and term. The schedule table shows exactly when your balance drops and how interest shrinks each year.
How to use
- Enter the loan amount.
- Enter the annual interest rate.
- Enter the term in years and study the schedule.
Amortization formulas
| Term | Meaning |
|---|---|
| P | Principal borrowed. |
| r | Monthly rate (annual / 12). |
| n | Number of monthly payments. |
| Interest part | Balance x r (shrinks over time). |
| Principal part | Payment minus interest (grows over time). |
Worked examples
30-year mortgage
$250,000 at 6.5% for 30 years: payment = $1,580.17/month; total interest = $318,861. In year 1, about 84% of each payment is interest.
15-year comparison
Same loan for 15 years: payment = $2,177.77/month; total interest = $141,998. You save over $176,000 in interest.
How amortization shifts over time
| Loan stage | Interest share | Principal share |
|---|---|---|
| Early years | High (balance is large) | Low |
| Middle | Balanced | Balanced |
| Final years | Low | High |
Frequently asked questions
What is loan amortization?
It is the process of paying off a loan through fixed installments, where each payment covers that month's interest and the rest reduces the principal.
Why is my first payment mostly interest?
Interest is charged on the full balance, which is largest at the start. As the balance falls, more of each fixed payment goes to principal.
Does extra principal payment help?
Yes, paying extra toward principal shortens the loan and cuts total interest, because future interest accrues on a smaller balance.
What is the difference between amortization and depreciation?
Amortization repays a loan over time; depreciation is the accounting decline in an asset's value.
Is a 15-year or 30-year mortgage better?
15-year loans charge far less total interest but higher monthly payments. Choose based on what payment you can sustain comfortably.
Do extra payments lower my monthly payment?
No. An extra principal payment does not lower your required monthly payment; it shortens the loan term instead, because future interest is charged on a smaller balance. To lower the monthly payment itself you would need a formal recast or refinance.
Should I check for a prepayment penalty before paying extra?
Yes. Most modern residential mortgages have no prepayment penalty, but some commercial, subprime or private loans do, so check your loan agreement or Truth in Lending disclosure before sending a large extra payment.
Related: HELOC Calculator: Home Equity Line Payments
Sources
- CFPB — Mortgage and loan amortization explained
- Federal Reserve — Consumer credit data
Key takeaways
- Each payment = this month's interest + principal reduction.
- Shorter terms save enormous interest: compare 15 vs 30 years.
- The schedule table shows exactly where your money goes.
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