Amortization Calculator
Amortization Summary
Charts
Amortization Schedule
| # | Date | Payment | Interest | Principal | Extra | Balance |
|---|
How Amortization Works
Amortization is the process of paying off a debt over time through regular payments. A portion of each payment goes toward the loan's interest, and the remaining amount is applied to reduce the principal balance. Early in the loan, a larger portion of your payment goes to interest. As the loan matures, more of your payment is applied to the principal. An amortization schedule is a table that details this breakdown for every single payment over the life of the loan.
Example Amortization
Let's consider a common example: a $250,000 mortgage with a 30-year term at a fixed 3.5% annual interest rate, with monthly payments.
- Monthly Payment: The calculated monthly payment for principal and interest would be approximately $1,122.61.
- Total Interest Paid: Over 30 years, you would pay a total of approximately $154,141 in interest.
- Total Amount Paid: The total amount repaid would be the principal plus interest, summing to $404,141.
- Payoff Date: If the loan starts in September 2025, it will be fully paid off in September 2055.
This calculator can model this exact scenario and show you the full schedule, demonstrating how the balance decreases with each payment.
Tips to Pay Off Your Loan Faster
- Make Extra Payments: Even small, consistent extra payments can have a huge impact. Every extra dollar goes directly toward the principal, reducing the balance that accrues interest. Use the "Extra Recurring Payment" feature to see the effect.
- Use Bi-Weekly Payments: By paying half your monthly payment every two weeks, you'll make 26 half-payments a year, which equals 13 full monthly payments. That one extra payment per year dramatically cuts down your loan term and total interest.
- Apply Windfalls: Use bonuses, tax refunds, or other unexpected income as a lump-sum payment on your loan. This can shave years off your repayment schedule.
- Refinance to a Shorter Term: If your financial situation improves, consider refinancing from a 30-year loan to a 15-year loan. Your monthly payments will be higher, but you'll typically get a lower interest rate and pay far less in total interest.
- Avoid Balloon Payments: While a balloon payment can lower your regular payments, it requires a very large lump sum at the end of the loan term, which can be risky if you're not prepared for it.
Frequently Asked Questions (FAQ)
An amortization schedule is a detailed table that lists each payment for a loan over its entire term. For each payment, it shows how much goes towards interest and how much goes towards paying down the principal balance. It also shows the remaining loan balance after each payment.
The total interest you'll pay depends on the loan amount (principal), the interest rate, and the loan term. Our amortization calculator precisely computes the total interest paid over the life of the loan, both with and without extra payments, so you can see the full cost.
Yes, absolutely. Making extra payments, whether they are recurring small amounts or occasional lump sums, reduces your principal balance faster. This means less of your future payments will go towards interest, saving you a significant amount of money and helping you pay off the loan years earlier. The calculator quantifies these savings for you.
Amortization refers to spreading out the cost of an intangible asset or paying off a loan over time. Depreciation is similar but applies to tangible assets (like vehicles or machinery), accounting for their loss in value over time due to wear and tear.
A true bi-weekly payment plan involves paying half of your monthly payment every two weeks. Since there are 26 bi-weekly periods in a year, this results in 13 full monthly payments instead of 12. This extra payment goes directly to the principal, accelerating your payoff and reducing total interest. Our calculator can model this effect.
Refinancing to a shorter term (e.g., from a 30-year to a 15-year mortgage) typically results in a lower interest rate and significantly less total interest paid. However, the periodic payments will be higher. Use the calculator to compare your current loan with a potential refinanced loan to see if the higher payment fits your budget.
