Amortization is the process of paying off a debt in equal installments, where each payment covers that month’s interest and chips away at the principal. This calculator builds the full schedule — every payment, its date, its interest and principal, and the balance left — and lets you layer extra payments on top to see exactly how much sooner the loan ends and how much interest you avoid.
How to use the amortization calculator
- Enter the loan amount, the interest rate and the term in years or months.
- Add the first payment date if you want each row dated and a payoff date on the tape.
- Optionally enter extra payments: a fixed amount every month, an amount once a year (added to every 12th payment) and a one-time payment with the payment number it goes with.
- Compare the yearly chart of principal versus interest, then open the full monthly table.
The amortization formulas
The scheduled payment comes from the standard annuity formula:
Each row of the schedule then repeats three steps, with B the balance before the payment:
Here r is the annual rate divided by 12 and n is the number of monthly payments. The final payment is trimmed so the balance lands exactly on zero.
Worked example
A $200,000 loan at 6% for 15 years (180 payments):
r = 0.06 ÷ 12 = 0.005, so the payment is $1,687.71.
Payment 1: interest = 200,000 × 0.005 = $1,000.00; principal = $687.71; balance = $199,312.29.
Over the full term you pay $103,788.46 in interest. Principal first exceeds interest at payment #43.
Adding $100 a month changes the picture: the loan ends 15 months early and total interest drops to $93,759.99 — a saving of $10,028.47 for $16,400 of extra principal.
Comparing extra-payment strategies
Using the same $200,000, 6%, 15-year loan:
| Strategy | Extra paid | Interest saved | Months saved |
|---|---|---|---|
| $100 every month | $16,400 | $10,028.47 | 15 |
| $1,200 once a year | $15,600 | $9,338.49 | 14 |
| $10,000 with payment 1 | $10,000 | $13,634.86 | 14 |
The yearly payment saves a little less than the monthly one even though the totals are close, because each $1,200 sits on the balance for up to eleven extra months before it is applied. The lump sum wins per dollar because it removes principal before any of it can accrue interest. Timing, not just amount, drives the savings.
Before you prepay
Check that your loan has no prepayment penalty and tell your servicer the extra amount is for principal, not an advance on next month’s payment. It usually makes sense to keep an emergency fund and clear higher-rate debt such as credit cards first, since prepaying a 6% loan is effectively a guaranteed 6% return.
Amortized loans versus other structures
A standard amortizing loan keeps the payment level. An equal principal loan repays the same principal each month instead, so payments start higher and decline. An interest-only mortgage postpones amortization entirely for several years. If you already have a mortgage and want to target a payoff date, the mortgage payoff calculator starts from your remaining balance.
Schedules are estimates. Lenders may round each payment to the cent, accrue interest daily or apply extra payments on a different date, so small differences from your statement are normal.
Frequently asked questions
What is an amortization schedule?
It is a table that lists every payment on a loan and splits each one into the interest charged that month and the principal repaid, along with the balance left afterward. On a fixed-rate loan the payment stays the same while the interest share shrinks and the principal share grows.
Why do early payments go mostly to interest?
Interest is charged on the outstanding balance, which is largest at the start. On a $200,000 loan at 6%, the first month's interest is $1,000, so only $687.71 of the $1,687.71 payment reduces the principal.
Is it better to pay extra monthly or in one lump sum?
Dollar for dollar, money applied earlier saves more because it stops interest from accruing on that principal sooner. In the example on this page, $10,000 applied with the first payment saves more interest than $16,400 spread over the life of the loan at $100 a month.
Do extra payments lower my monthly payment?
Not on a standard installment loan. The required payment stays the same and the loan simply ends sooner. Some lenders will recast the loan after a large lump sum, which re-amortizes the lower balance and reduces the payment, usually for a fee.
What is negative amortization?
It happens when a payment is smaller than the interest due, so the unpaid interest is added to the balance and the debt grows. Fully amortizing loans, like the ones this calculator models, are designed so that never happens.