Amortization Calculator

What this calculator estimates

This calculator models a fully amortizing, fixed-rate loan paid in equal scheduled installments. Each payment first covers interest accrued on the outstanding balance; the remainder reduces principal. The calculator also lets you add the same extra principal amount to every installment. That extra amount does not change the contractual base payment, but it reduces the balance faster, which usually lowers total interest and shortens the payoff period.

The model is suitable for many conventional mortgages, auto loans, equipment loans, student loans, and business term loans when the interest rate is fixed and payments occur at regular intervals. It does not model variable rates, fees, taxes, insurance, late charges, prepayment penalties, or irregular one-time payments. For mortgage disclosure concepts and the difference between principal, interest, and other housing costs, consult the Consumer Financial Protection Bureau’s Loan Estimate guide.

Input guide

• Loan amount is the opening principal. Enter the amount actually financed, not the asset price unless they are identical. A higher principal increases the payment and total interest roughly in proportion.
• Amortization term is the planned repayment horizon in years. A longer term usually lowers each payment but increases lifetime interest. A shorter term does the reverse.
• Annual interest rate is the nominal rate before the selected compounding convention is applied. Enter 5.25 for 5.25%. A higher rate raises both the periodic payment and the interest share of early installments.
• Compounding frequency controls how the nominal annual rate becomes an effective rate between payments. More frequent compounding can raise the effective borrowing cost when the nominal rate is unchanged.
• Payment frequency determines how many installments occur each year. It also controls the number of schedule rows and the periodic rate used by the annuity formula.
• Extra payment is optional and is applied directly to principal each period. Use zero when you want the original contractual schedule. Confirm with the lender that extra payments are permitted and correctly designated as principal.

How the calculation works

The nominal annual rate is first converted to a rate per payment period. When compounding occurs a fixed number of times per year, the periodic rate is derived from the effective growth over one payment interval. Continuous compounding uses the exponential equivalent. The base installment then follows the present-value-of-an-annuity relationship:

When the periodic rate is zero, the calculator uses principal divided by the number of payments. The schedule then iterates period by period: interest equals opening balance times the periodic rate; principal equals the actual payment minus interest; and closing balance equals opening balance minus principal. The last payment is capped so the balance ends at zero rather than becoming negative.

For a broader explanation of amortized debt and why the principal share rises over time, see the Investopedia overview of amortization.

Understanding the results

Original periodic payment is the level installment required to repay the loan over the chosen term without extra principal. Payment with extra adds the selected extra amount, although the final installment may be smaller. Total interest is the sum of interest across the active schedule. Total paid equals principal plus interest. Payoff time reports the number of active payment periods and an approximate duration in years and months. Interest saved and time saved compare the active extra-payment plan with the original schedule.

A zero-rate loan produces no interest and a straight-line principal decline. A zero loan amount produces no drawable chart and no repayment schedule. If the extra payment is very large, the loan may be retired in only a few periods; the last payment is still limited to the remaining principal plus accrued interest.

Reading the charts and schedule

The cost donut divides total cash paid into original principal and interest. A larger interest segment signals a higher financing cost relative to the amount borrowed. The balance chart shows three cumulative series. Remaining balance should fall to zero. Principal paid should rise toward the original loan amount. Interest paid should rise throughout the schedule but often grows more slowly near the end because the balance generating interest has become smaller.

The periodic table lists opening balance, payment, interest, principal, extra principal, and closing balance for every installment. The yearly view groups those same rows into annual buckets, which is easier for long loans. Because every output uses one underlying model, the chart totals, schedule totals, and exported workbook cross-foot to the same figures.

Practical tradeoffs and common mistakes

Extra principal can create a risk-free reduction in future loan interest, but it also uses cash that might be needed for emergencies or higher-priority obligations. Review the contract for prepayment penalties and ask how the servicer applies additional funds. The CFPB’s prepayment-penalty explanation describes why this clause matters.

Common mistakes include entering the asset price instead of the financed balance, confusing a nominal rate with an effective annual rate, selecting a payment frequency that does not match the contract, and assuming taxes or insurance are included. This calculator is educational and does not constitute financial, tax, legal, or investment advice. Compare its output with the lender’s official disclosure and payment schedule before making a decision.