Loan Amortization
Loan amortization is the process of paying down a debt in regular, equal installments where each payment covers the interest due first and then reduces the principal. The math looks simple but the reality is eye-opening: on a standard 30-year mortgage at 7%, nearly 75% of your first monthly payment is pure interest. Our amortization calculator shows you exactly how every dollar is split, generates a full payment-by-payment schedule, and lets you model extra payments to see how much interest you could save.
Paying extra each month reduces your total interest and payoff time
Amortization Schedule
| # | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
Monthly Payment
How to Read an Amortization Schedule
An amortization schedule is a table showing every payment you'll make over the life of a loan. Each row shows how your fixed monthly payment is split between reducing the principal balance and paying interest charges.
In the early months of a loan, the vast majority of each payment goes toward interest — not the balance you owe. This is because interest is calculated on the remaining balance, which is at its highest at the start of the loan. As you pay down the principal, each month's interest charge decreases slightly, and more of your payment goes toward principal.
This is why the total interest paid over the life of a 30-year mortgage can easily exceed the original loan amount. The amortization schedule makes this visible, which often motivates borrowers to consider making extra payments to accelerate payoff.
The Impact of Extra Loan Payments
Making even a small extra principal payment each month has an outsized impact on the total interest you pay. Because each dollar of extra payment reduces the balance that future interest is calculated on, the savings compound over the remaining life of the loan.
On a 30-year mortgage at 6.5%, paying an extra $200/month can save tens of thousands in interest and cut years off the loan term. The earlier you make extra payments, the more you save — since those early payments prevent interest from accumulating on a higher balance for decades.
Before making extra payments, confirm with your lender that there is no prepayment penalty. Also ensure extra payments are applied to the principal, not future payments — some lenders require you to specify this explicitly.
About the Loan Amortization Calculator
Loan amortization is the process of paying down a debt in regular, equal installments where each payment covers the interest due first and then reduces the principal. The math looks simple but the reality is eye-opening: on a standard 30-year mortgage at 7%, nearly 75% of your first monthly payment is pure interest. Our amortization calculator shows you exactly how every dollar is split, generates a full payment-by-payment schedule, and lets you model extra payments to see how much interest you could save.
How to use it
- Enter the loan amount (principal).
- Enter the annual interest rate.
- Enter the loan term in months or years.
- View the monthly payment, total interest paid and full amortization table.
- Add an optional extra monthly payment to see how fast you can pay off the loan.
Formula & methodology
Monthly payment M = P × r(1+r)^n / ((1+r)^n − 1), where P = principal, r = monthly rate (APR/12), n = total payments. Interest portion = remaining balance × r.
Common use cases
- Understanding how much of your mortgage goes to interest vs principal
- Deciding whether to make extra principal payments
- Comparing a 15-year vs 30-year mortgage total cost
- Modeling car loan payoff with early payments
- Calculating student loan repayment under a standard plan
Frequently asked questions
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