💰 Amortization Calculator
Calculate loan amortization
How to Use This Calculator
Enter Loan Principal
Input the total loan amount (principal) you're borrowing. This is the initial amount of the loan before interest.
Enter Interest Rate
Input the annual interest rate as a percentage (e.g., 5 for 5%). The calculator converts this to a monthly rate for calculations.
Enter Loan Term
Input the loan term in years (e.g., 30 for a 30-year mortgage, 15 for a 15-year loan). The calculator converts this to monthly payments.
Review Results
See your monthly payment amount, total interest paid over the life of the loan, and total amount paid. Use this to understand the true cost of borrowing.
Formula
M = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ - 1]
Where:
• M = Monthly Payment
• P = Principal (Loan Amount)
• r = Monthly Interest Rate (Annual Rate ÷ 12)
• n = Number of Monthly Payments (Years × 12)
Example Calculation:
If loan is $200,000, interest rate 4.5%, term 30 years:
• Monthly rate = 4.5% ÷ 12 = 0.375% = 0.00375
• Number of payments = 30 × 12 = 360
• M = $200,000 × [0.00375(1.00375)³⁶⁰] / [(1.00375)³⁶⁰ - 1]
• M = $200,000 × 0.00506685 / 2.847696
• Monthly payment = $1,013.37
• Total payments = $1,013.37 × 360 = $364,813
• Total interest = $364,813 - $200,000 = $164,813
About Amortization Calculator
An amortization calculator helps you understand how loan payments work over time. Amortization is the process of paying off a loan through regular payments, where each payment covers both principal (the loan amount) and interest (the cost of borrowing). In the early years, most of your payment goes toward interest, while in later years, more goes toward principal. This calculator shows you your monthly payment, total interest paid, and helps you understand the true cost of borrowing.
When to Use This Calculator
- Mortgage Planning: Calculate monthly mortgage payments
- Loan Comparison: Compare different loan terms and rates
- Budget Planning: Plan your monthly budget around loan payments
- Interest Analysis: Understand how much interest you'll pay
- Refinancing Decision: Evaluate if refinancing makes sense
Understanding Amortization
- Early Payments: Mostly interest, little principal reduction
- Later Payments: Mostly principal, little interest
- Total Interest: Can be substantial over long loan terms
- Shorter Terms: Higher monthly payments but less total interest
- Longer Terms: Lower monthly payments but more total interest
Why Use Our Calculator?
- ✅ Accurate Calculations: Uses standard amortization formulas
- ✅ Payment Planning: See your exact monthly payment
- ✅ Interest Analysis: Understand total interest costs
- ✅ Loan Comparison: Compare different loan options
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is loan amortization?
Loan amortization is the process of paying off a loan through regular payments over time. Each payment includes both principal (the loan amount) and interest (the cost of borrowing). Over time, the proportion shifts from mostly interest to mostly principal.
Why do I pay more interest early in the loan?
Early in the loan, the principal balance is highest, so interest is calculated on a larger amount. As you pay down the principal, the interest portion decreases, and more of each payment goes toward reducing the principal balance.
Should I choose a shorter or longer loan term?
Shorter terms (15 years) have higher monthly payments but significantly less total interest. Longer terms (30 years) have lower monthly payments but more total interest. Choose based on what you can afford monthly and your financial goals.
Can I pay extra to reduce interest?
Yes! Making extra principal payments reduces your loan balance faster, which reduces the total interest paid and can shorten the loan term. Even small extra payments can save thousands in interest over the life of the loan.