Amortization Calculator

A fixed-rate loan uses one level payment for its whole term, sized so the balance reaches exactly zero on the final payment. The payment comes from the standard amortization formula, where the monthly rate is the annual rate divided by 12 and n is the number of payments.

The schedule is then built one month at a time. Interest for the month is the current balance times the monthly rate; whatever is left of the payment reduces the principal; the new balance carries into the next month. Because the balance falls each month, the interest portion shrinks and the principal portion grows — slowly at first, then faster. At a 0% rate the interest term drops out and the payment is simply the balance divided by the number of months.

• Monthly rate r = annual rate ÷ 100 ÷ 12
• Number of payments n = years × 12 + extra months
• Payment = P × r ÷ [1 − (1 + r)^−n] (at 0%: Payment = P ÷ n)
• Interest this month = current balance × r
• Principal this month = payment + any extra − interest this month
• New balance = current balance − principal this month
• Total interest = the sum of every month's interest until the balance reaches zero

The payment never changes but its split does: interest is charged on the balance you still owe, so principal starts small and accelerates. Total interest, not the monthly payment, is the real price of the term you chose.

Common mistakes and assumptions

• Entering the APR instead of the note rate, which overstates the interest the balance actually accrues.
• Reading the payment as the full housing cost; escrowed tax, insurance, and HOA dues sit on top of it.
• Assuming an extra payment is applied to principal automatically — many servicers hold it unless you say so.

A buyer borrows $320,000 over 30 years at a 6.5% fixed rate, and wants to see the schedule alongside what an extra $200 a month would do.

1. 1Monthly rate = 6.5 ÷ 100 ÷ 12 = 0.0054167, and n = 30 × 12 = 360 payments.
2. 2Payment = $320,000 × 0.0054167 ÷ [1 − 1.0054167^−360] = $2,022.62 of principal and interest.
3. 3Month one: interest = $320,000 × 0.0054167 = $1,733.33, so only $289.28 goes to principal — 14% of the payment.
4. 4Across the first year $20,695 goes to interest and $3,577 to principal, leaving a balance of $316,423.
5. 5Left alone, the loan runs the full 360 payments and costs $408,142 in interest — more than the amount borrowed.
6. 6Adding $200 a month clears it in 281 payments instead of 360, saving about $105,429 of interest and just over six and a half years.

What is an amortization schedule?

It is the payment-by-payment table of a loan: for each month it shows the payment, how much went to interest, how much reduced the principal, and the balance left. It exists because the split changes every month even though the payment does not.

Why is nearly all of my early payment going to interest?

Interest is charged on the balance you currently owe, and at the start that balance is at its largest. On a $320,000 loan at 6.5%, the first month's interest alone is $1,733 of a $2,023 payment. As the balance falls the interest portion shrinks and principal accelerates, which is why the last years of a loan pay it down quickly.

How is the monthly payment calculated?

Payment = P × r ÷ [1 − (1 + r)^−n], where P is the amount borrowed, r is the annual rate divided by 12, and n is the number of monthly payments. The formula solves for the level amount that brings the balance to exactly zero on payment n.

How does an extra monthly payment change the schedule?

Every extra dollar reduces the balance immediately, so next month's interest is charged on less — and the saving compounds for the rest of the loan. The payment stays the same, so the loan simply ends sooner. For deeper comparison of several extra amounts and a target payoff date, use the Extra Payment Payoff Calculator.

Does the schedule include property tax, insurance, or PMI?

No. Amortization only covers principal and interest, which is why a lender's quoted monthly figure is usually higher than this one. Escrowed tax and insurance are collected alongside the payment but never reduce the balance. The Mortgage Calculator adds those escrow items if you want the full housing payment.

Is the interest rate the same as the APR?

No. The interest rate is what the schedule amortizes; the APR restates the cost including origination fees and points, which is why it is usually higher. Enter the note rate here, and treat the APR as the figure for comparing loan offers.

What happens at a 0% interest rate?

The interest term disappears and the payment is just the balance divided by the number of months, with every dollar reducing principal. Promotional 0% financing behaves this way — though deferred-interest offers can add back-dated interest if the balance is not cleared in time, which this schedule does not model.

Can I use this for a car loan or a personal loan?

Yes. Any fixed-rate, fixed-term, equal-payment loan amortizes the same way — enter the term in years plus extra months for something like 66 months. For a vehicle purchase with tax, fees, and a trade-in folded in, the Auto Loan Calculator sets the financed amount up first.