📉 Loan Amortization Calculator
Calculate monthly loan amortization schedules, principal payoff breakdown, and total cumulative interest.
How an amortization schedule works, line by line
Amortization is the process of paying a debt down to zero through equal instalments. The payment stays the same every month, but what it buys changes continuously: interest is charged on the outstanding balance, and since that balance shrinks, the interest portion shrinks with it and the principal portion grows to fill the gap.
That single mechanism explains almost everything people find surprising about loans. Why the balance barely moves in the first few years. Why an extra payment early is worth many times the same payment late. Why refinancing into a fresh 30-year term can lower your payment and still cost you more.
The arithmetic of one row
Each row of a schedule is built from three steps. Take a $250,000 loan at 6% over 30 years, where the fixed monthly payment is $1,498.88:
- Interest for the month = balance × monthly rate. Month one: $250,000 × 0.005 = $1,250.00.
- Principal for the month = payment − interest = $1,498.88 − $1,250.00 = $248.88.
- New balance = old balance − principal = $249,751.12.
Repeat 360 times and the balance lands exactly on zero. In month two the interest is $1,248.76, a little less, so $250.12 goes to principal, a little more. The shift is tiny each month and enormous over the term.
The shape of the curve
| Year | Interest paid that year | Principal paid that year | Balance at year end |
|---|---|---|---|
| 1 | $14,918 | $3,068 | $246,932 |
| 5 | $14,096 | $3,890 | $232,735 |
| 10 | $12,695 | $5,291 | $208,558 |
| 15 | $10,789 | $7,197 | $175,672 |
| 20 | $8,196 | $9,790 | $130,938 |
| 25 | $4,669 | $13,317 | $70,100 |
| 30 | $1,473 | $16,513 | $0 |
In year one, 83% of what you pay is interest. In year thirty, 92% is principal. The crossover, where more of each payment goes to the balance than to the bank, arrives in month 221 of 360: past the halfway point of the term.
Why early overpayments are worth so much more
An extra $1,000 paid in month one removes $1,000 of balance that would otherwise have accrued interest for 359 months. At 6% compounded monthly, that single payment saves about $5,020 in interest and pulls the payoff date forward. The same $1,000 paid in month 300 saves about $94. Nothing changed except the number of months the money had left to work.
A useful rule: on a 30-year loan at typical rates, every dollar of principal paid in the first year saves roughly five dollars of interest. By year twenty it saves about twenty cents.
The refinancing trap
Suppose you are ten years into the loan above. Your balance is $208,558 and you have paid $140,000 in interest. A lender offers 5% on a new 30-year term. The payment drops from $1,498.88 to $1,119.68, which looks like a clear win.
But you have just reset the clock. You will now pay for forty years in total, and the interest on the new loan is $194,527. Added to the $140,000 already spent, that is $334,527 against the $289,595 you would have paid by simply finishing the original loan. The lower payment costs $45,000. Refinancing into a shorter remaining term at a lower rate is almost always good; refinancing into a longer one is a cash-flow decision, not a saving.
Biweekly payments
Paying half the monthly amount every two weeks produces 26 half-payments a year, which is 13 monthly payments rather than 12. On the loan above, that extra payment shortens the term from 30 years to about 25 years and 2 months and saves roughly $48,000 in interest. It works purely because you are overpaying by 8.3%, not because of anything magic about the fortnightly schedule, and you can get exactly the same result by adding one twelfth to each monthly payment.
Where amortization also shows up
The same schedule governs car loans, personal loans, student loans and most business term loans. The only common exceptions are interest-only loans, where no principal is repaid until the end, and credit cards, where the minimum payment is a percentage of the balance rather than a fixed amount, which is why card debt can last decades.
Frequently Asked Questions (FAQs)
Why is almost all of my first payment interest?
Because interest is charged on the balance, and at the start the balance is the whole loan. On a 30-year mortgage at 6%, about 83% of the first year's payments are interest. It is not a fee structure or a trick; it is arithmetic that reverses as the balance falls.
When does my loan reach the halfway point?
Later than you expect. On a 30-year loan at 6% you pass half the balance in month 251 of 360, roughly year 21. The payment split reaches 50/50 earlier, in month 221. Both depend on the rate: the higher the rate, the later the crossover.
Does making one extra payment a year really save five years?
Close to it. On a 30-year loan at 6% an extra monthly payment each year cuts about five years off the term. At 4% it saves about four years; at 8% closer to six. The higher the rate, the more an overpayment is worth.
Should I overpay the mortgage or invest the money?
Compare the mortgage rate to the return you expect after tax. Overpaying a 6.5% mortgage is a guaranteed 6.5% return, which is hard to beat reliably in the market. Below about 4% the argument usually favours investing, especially where mortgage interest is tax deductible. Clear high-interest debt before either.
What is negative amortization?
It happens when the payment is smaller than the interest due, so the shortfall is added to the balance and the debt grows. Some adjustable-rate and payment-option loans allow it. It is rare now, and worth avoiding: you can make every payment on time and still owe more than you borrowed.
Can I see the schedule for a car loan?
Yes, the mechanism is identical, just over a shorter term. Enter the amount, rate and number of months. The auto loan calculator adds deposit and trade-in handling if you need it.
Why does my lender's schedule differ by a few dollars?
Rounding conventions and day-count methods. Some lenders charge interest on actual days elapsed rather than on a uniform twelfth of a year, which shifts each row slightly. Over a full term the difference is usually under 0.1% of total interest.