Monthly Schedule
Annual Schedule
Understanding Amortization
Amortization is the process of spreading loan payments over a fixed term. Each payment covers interest first, then reduces the outstanding principal. Early payments are interest-heavy; later ones pay down more principal.
Key Concepts:
- Principal: The original loan amount (minus any down payment).
- Interest Rate (i): Annual rate converted to a monthly fraction (
annual ÷ 12 ÷ 100). - Term (n): Total number of payments (
years × 12 + months).
Calculation Formula:
M = P × i × (1 + i)n / ((1 + i)n – 1) + Extra Payment
Worked Example:
You borrow $10,000 at 5% APR for 2 years. With no down payment and zero extras, you pay $438.71 monthly. Over 24 payments, total interest is $529.04, and total paid is $10,529.04.
Adding an extra $50 each month cuts ~3 months off the term and saves interest.
Disclaimer: This calculator is for educational purposes only. Results are estimates based on your inputs.
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