Loan Amortization Calculator
Generate detailed month-by-month amortization schedules with principal and interest breakdown
Loan Details
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Enter your loan details to generate an amortization schedule
Understanding Loan Amortization
📊 What is Loan Amortization?
Loan amortization is the process of paying off a debt through regular payments over time. Each payment covers both interest charges and a portion of the principal balance. Early in the loan, most of your payment goes toward interest. Over time, more of each payment goes toward the principal.
💡 How to Read an Amortization Schedule
Month: The payment number (1-360 for a 30-year loan).
Payment: Your fixed monthly payment amount.
Principal: The portion of your payment that reduces the loan balance.
Interest: The portion of your payment that goes to the lender as interest charges.
Balance: The remaining amount you owe after this payment.
💰 Benefits of Making Extra Payments
Making extra principal payments can significantly reduce the total interest you pay over the life of the loan and help you pay off the loan faster. Even small extra payments ($50-100/month) can save thousands in interest and shave years off your loan term.
Frequently Asked Questions
What types of loans use amortization?
Most installment loans use amortization, including mortgages, auto loans, personal loans, and student loans. Credit cards and lines of credit typically do not use amortization since the balance can fluctuate.
Why does so much interest get paid early in the loan?
Interest is calculated on the outstanding balance. Early in the loan, the balance is highest, so interest charges are highest. As you pay down the principal, the interest portion decreases and the principal portion increases.
Should I make extra payments toward my loan?
If your loan allows prepayment without penalties, extra payments can save significant interest and help you become debt-free faster. However, ensure you have an emergency fund first and that your loan interest rate is higher than what you could earn by investing.
What is negative amortization?
Negative amortization occurs when your monthly payment is less than the interest due, causing your loan balance to increase rather than decrease. This can happen with certain adjustable-rate mortgages or payment option loans. It's generally not recommended as it increases your total debt.