What is Loan Amortization?

Loan amortization is the process of paying off a debt over time through regular payments. An amortization schedule is a table that details each periodic payment on a loan. It shows how much of each payment is applied to the interest and how much is applied to the principal balance. The schedule continues until the loan is fully paid off at the end of its term.

How to Use the Calculator

This tool helps you see a detailed breakdown of your loan payments over time. Follow these simple steps:

• Loan Amount: Enter the total amount of money you are borrowing.
• Annual Interest Rate: Input the loan's annual interest rate.
• Loan Term in Years: Provide the total number of years you have to repay the loan.

After you enter the information the calculator will generate a summary of your loan and a complete payment by payment schedule.

Understanding the Amortization Schedule

The generated schedule provides valuable insight into your loan. Here is a breakdown of the columns:

• Month: The payment number over the life of the loan.
• Payment: The fixed monthly payment amount. This total stays the same for each period.
• Principal: The portion of your monthly payment that goes toward reducing your outstanding loan balance. You will notice this amount increases over time.
• Interest: The portion of your monthly payment that covers the cost of borrowing the money. This amount decreases over time as your loan balance gets smaller.
• Balance: The remaining amount of the loan that you still owe after the current payment has been made.

Why is Amortization Important?

Understanding amortization can help you make better financial decisions. At the beginning of a long term loan like a mortgage a large portion of your payment goes toward interest. As you continue to make payments more of your money starts to pay down the principal. This is why making extra payments especially early in the loan term can have a big impact. An extra payment goes almost entirely toward the principal which reduces your balance and the total interest you will pay in the future. This can help you pay off your loan years sooner and save a significant amount of money.

Disclaimer: This calculator and the generated schedule are for informational purposes only. The results are estimates and should not be considered financial advice. Please consult with a lender or financial professional for exact loan details.