About this calculator
Amortization is the process of paying off a loan in regular installments, where each payment covers the interest due plus a slice of the principal. Because interest is charged on the outstanding balance, the slices change over time: at the start, most of your payment is interest; by the end, almost all of it is principal. The schedule below makes that visible, month by month.
The extra-payment field shows why amortization schedules matter. Extra principal payments attack the balance directly, which reduces every future interest charge — a modest extra amount can remove years from a loan and save tens of thousands in interest.
How to use it
- Enter the loan amount, interest rate and term.
- Read the schedule: each row is one monthly payment.
- Try adding an extra monthly payment and watch the payoff count and total interest shrink.
The formula
Each month, interest is charged on the balance carried into that month. Whatever is left of the fixed payment after interest reduces the balance. Repeat until the balance reaches zero — that repetition is the amortization schedule.
Worked example
A $200,000 loan at 5.5% over 15 years costs $1,634.17 a month. In the first payment, $916.67 is interest and only $717.50 reduces the balance. By the final year the split has flipped: almost the entire payment is principal. Adding $200 extra a month clears the loan in 152 payments instead of 180 — about 2.3 years early — and saves $16,311.12 in interest.
Frequently asked questions
Why is so much of my early payment interest?
Because interest is a percentage of the balance, and the balance is largest at the start. On a $200,000 loan at 5.5%, the first month's interest is $916.67 no matter what. As the balance falls, the interest charge falls with it, so more of the fixed payment reaches principal.
How much do extra payments really save?
It depends on the rate and how early you start, but the effect is powerful: extra money goes 100% to principal, and every dollar of principal removed saves interest for the remaining life of the loan. Use the extra-payment field above to see the exact effect on your loan.
What is the difference between amortization and a payment schedule from my lender?
None in substance — your lender uses the same math. Differences appear only if your loan has variable rates, fees rolled into payments, or payments timed differently (for example bi-weekly schedules).
Can a loan fail to amortize?
Yes — if the payment is smaller than the monthly interest, the balance grows instead of shrinking. That is called negative amortization and appears in some adjustable and interest-only products. A standard fixed-rate loan is designed so the payment always covers interest plus some principal.