Amortization Calculator
View a complete loan amortization schedule with payment breakdown.
| Year | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
How Amortization Works
Amortization is the process of paying off a loan through a series of fixed periodic payments. Each payment is the same amount, but the internal split between interest and principal changes every month. Early payments are almost entirely interest; later payments are almost entirely principal. Understanding that split is the single most important concept in consumer lending.
The mechanics are simple. At the start of each month, the lender calculates interest on your current balance: balance × (annual rate / 12). Your fixed monthly payment first covers that interest, and everything left over reduces the principal. Next month, the balance is smaller, so the interest charge is smaller, and more of the payment goes to principal. Repeat for the full term and the balance reaches exactly zero on the final payment — that's the guarantee built into the formula.
This calculator builds the full schedule from three inputs — loan amount, annual rate, and term — and shows how interest and principal flow over time. Use the monthly view to see every payment; use the yearly view for a summary.
Why Early Payments Are Mostly Interest
Most borrowers are shocked the first time they see an amortization schedule. On a $300,000 mortgage at 6.5% for 30 years, month 1 looks like this: payment $1,896 = interest $1,625 + principal $271. 86% of the first payment is interest. After five years of payments totaling $113,778, the balance has only dropped from $300,000 to about $281,239 — you've paid just $18,761 of principal and $95,017 of interest.
This is not a trick. It's arithmetic. Interest is always charged on the current balance, which is highest at the start. By year 15, the balance is about $214,000 and monthly interest has fallen to about $1,159. By year 28, the balance is under $60,000 and nearly every dollar of the $1,896 payment goes to principal.
Extra principal in the first five years of a long loan saves far more interest than the same extra dollar 20 years later. $1,000 of extra principal in month 1 of a 30-year 6.5% mortgage eliminates roughly $4,500 of future interest. That same $1,000 in year 25 eliminates only about $350. Early = cheap, late = expensive.
The Amortization Formula
PMT— the fixed monthly paymentP— original principal (loan amount)r— monthly interest rate (annual rate ÷ 12)n— total number of monthly payments (years × 12)
Once you have the payment, the schedule comes from a two-step loop: interest_m = balance × r, then principal_m = PMT − interest_m, then balance ← balance − principal_m. Repeat n times and the balance lands on zero. This is exactly what the JavaScript in this page does — you can read the source in your browser's dev tools.
Worked Example — Maya's 30-Year Mortgage
Extra Payment Savings — $300K at 6.5% / 30 yr
Because interest is always charged on the current balance, any dollar of extra principal eliminates all of the interest that dollar would have accrued for the rest of the loan. The table below shows how dramatically small extras change the outcome on a standard $300,000 30-year mortgage at 6.5%.
| Strategy | Interest paid | Years to payoff | Saved vs baseline |
|---|---|---|---|
| Standard payment ($1,896/mo) | $382,633 | 30.0 | — |
| +$100 / month extra | $337,250 | ~26.6 | $45,383 |
| +$200 / month extra | $304,933 | ~23.9 | $77,700 |
| +$500 / month extra | $240,128 | ~18.4 | $142,505 |
| Biweekly (half every 2 weeks = 13 monthlies / yr) | $326,113 | ~25.7 | $56,520 |
| One-time $10,000 lump sum in month 1 | $336,800 | ~27.5 | $45,833 |
Computed from the standard amortization formula. Results round; actual lender calculations may vary slightly due to day-count conventions.
Amortization Rules of Thumb
On a 30-year loan, about 80% of the interest you will ever pay is front-loaded into the first 15 years. Extra principal payments in the first 5 years are worth roughly 10× the same payments in the last 5 years in terms of interest saved. If you can afford even small extras, start early.
Dropping from a 30-year to a 15-year loan typically saves more interest than a 1-percentage-point rate cut. A $300K 30-year at 6.5% costs $382,633 in interest; a 15-year at 6.0% costs $155,683 — $226,950 less, even though the monthly payment rises by about $635.
Some servicers apply extra payments to the next month's installment instead of principal. Mark "apply to principal" on the check or in the online portal, or call the servicer. One phone call can be worth tens of thousands.
Amortization in Accounting — Intangible Assets
Amortization doesn't only apply to loans. In US accounting, amortization also means spreading the cost of an acquired intangible asset over its useful life, similar to how depreciation spreads the cost of tangible assets. The IRS codifies this under §197 of the Internal Revenue Code for intangible assets acquired after August 10, 1993.
Section 197 intangibles include goodwill, going-concern value, workforce in place, business books and records, patents, copyrights, licenses, franchises, trademarks, trade names, and covenants not to compete. The cost is amortized straight-line over 15 years (180 months), regardless of the asset's actual useful life. This is different from loan amortization math, but uses the same core idea: a fixed cost spread evenly across a defined number of periods.
How to Use This Calculator
- Enter the loan amount — the principal you're borrowing after down payment.
- Enter the annual interest rate from your loan offer or estimate.
- Set the term in years — 15 or 30 for mortgages, 3–7 for auto loans, 10–20 for student loans.
- Optional: set the loan start date so the schedule shows calendar dates.
- Toggle between yearly and monthly view — yearly for a quick summary, monthly for the full 360-row schedule.
- Read the summary — monthly payment, total principal, total interest, and payoff date.
- Compare scenarios — change the term, rate, or amount to see how each affects total interest.
Methodology & Assumptions
- Uses the standard fixed-rate amortization formula with monthly compounding.
- Assumes a constant interest rate for the full term — variable and ARM loans are not modeled.
- Does not include taxes, insurance, HOA, PMI, or escrow — principal and interest only.
- Assumes on-time monthly payments. Late fees and day-count conventions are not modeled.
- All math runs in your browser; no data leaves your device.
Glossary
- Amortization
- Paying down a loan through fixed periodic payments that each cover interest and principal. Also used in accounting for intangible-asset expense.
- Principal
- The outstanding balance of the loan. Each payment reduces principal by the amount left after paying the month's interest.
- Interest
- The lender's charge for lending money, computed each month on the current balance.
- Amortization schedule
- A table showing each payment period with payment amount, interest, principal, and remaining balance.
- Fully amortizing loan
- A loan where the fixed periodic payment covers both interest and principal so the balance reaches exactly zero at the end of the term.
- Negative amortization
- When the payment is less than the interest accrued, so unpaid interest is added to principal and the balance grows. Largely banned for consumer mortgages post-Dodd-Frank.
- Biweekly payment
- Paying half the monthly amount every two weeks, resulting in 26 half-payments per year = 13 monthly payments. One full extra payment per year goes to principal.
- Prepayment
- Paying principal early. Most US consumer loans allow it penalty-free; always confirm in the loan agreement.
- IRS §197 intangibles
- Goodwill, trademarks, patents, customer lists, and similar intangible assets that businesses amortize straight-line over 15 years for tax purposes.
- Depreciation
- The tangible-asset counterpart to amortization: writing down the cost of buildings, vehicles, or equipment over their useful life.
Frequently Asked Questions
A month-by-month table showing how each payment splits between interest and principal, plus the remaining balance. A 30-year $300,000 mortgage at 6.5% has 360 rows; month 1 is ~$1,625 interest + ~$271 principal, and month 360 is ~$10 interest + ~$1,886 principal.
Each month, the lender charges interest on the current balance first (balance × monthly rate), and whatever is left of your payment goes to principal. As the balance shrinks, the interest slice shrinks and more of each payment goes to principal.
Because interest is charged on the outstanding balance, which is highest at the start. Month 1 of a $300K 6.5% mortgage accrues $1,625 in interest because the balance is $300K. By year 15 the balance is ~$214K and monthly interest is only ~$1,159. It's arithmetic, not a trick.
Extras go straight to principal and eliminate all future interest that principal would have accrued. An extra $200/month on a $300K 30-year 6.5% mortgage saves roughly $77,700 in interest and cuts 6+ years off the term.
Amortization = intangible assets (loans, patents, goodwill). Depreciation = tangible assets (buildings, vehicles, equipment). Both spread a cost over time; the labels depend on what's being expensed.
Columns: period, payment, interest, principal, balance. Interest shrinks every row, principal grows, and balance drops from the loan amount to zero on the final row. Yearly summaries work best for 30-year loans; monthly detail for shorter or extra-payment scenarios.
Yes. 26 half-payments per year = 13 full monthly payments. The extra payment goes to principal and saves about $56,520 on a $300K 30-year 6.5% mortgage, shortening the term by ~4 years. Make sure your servicer applies payments immediately.
When the payment is less than interest accrued, so unpaid interest gets added to principal and the balance grows. Common in pre-2008 option ARMs; largely restricted under Dodd-Frank. Avoid unless you fully understand the long-term cost.
PMT = P × r × (1+r)^n / ((1+r)^n − 1). P = principal, r = monthly rate (annual ÷ 12), n = total number of monthly payments. Guarantees a zero balance after n payments.
IRS §197 requires businesses to amortize acquired intangibles — goodwill, trademarks, patents, customer lists, covenants not to compete — straight-line over 15 years (180 months). Different from loan math, same core idea: spread a fixed cost evenly across a defined period.