Amortization Calculator | Calculate Loan Payments & Schedule

Managing a loan can be confusing without knowing how payments are structured. An Amortization Calculator helps you calculate your loan payments and understand the schedule of principal and interest over time. This is essential for mortgages, car loans, personal loans, and business loans.

Why Use an Amortization Calculator?

• Financial Planning: Helps you budget for monthly loan payments.
• Interest Awareness: Shows how much interest you will pay over time.
• Comparison: Compare different loan terms, interest rates, and amounts.
• Transparency: Understand how each payment affects principal and interest.

Amortization Formula

The standard formula to calculate the monthly payment (M) is:

M = P × (r(1 + r)ⁿ) / ((1 + r)ⁿ − 1)

• P – Principal loan amount
• r – Monthly interest rate (annual rate ÷ 12)
• n – Total number of monthly payments (loan term in years × 12)

Step-by-Step Example: Calculate Monthly Payment

Problem: You take a loan of $50,000 at an annual interest rate of 6% for 5 years. Find the monthly payment.
Step 1: Convert annual interest rate to monthly: r = 6% ÷ 12 = 0.005
Step 2: Calculate total payments: n = 5 × 12 = 60
Step 3: Apply formula: M = 50000 × (0.005(1 + 0.005)⁶⁰) / ((1 + 0.005)⁶⁰ − 1)
Step 4: Solve: M ≈ $966.64 per month

How the Amortization Calculator Works

1. Enter your loan amount, annual interest rate, and loan term in years.
2. The calculator automatically converts the annual rate to a monthly rate.
3. It calculates your fixed monthly payment using the amortization formula.
4. It generates a full amortization schedule, showing principal and interest for each month.
5. You can adjust the loan term or interest rate to see how it affects payments.

Step-by-Step Example: Amortization Schedule

Using the previous example of $50,000 loan, 6% annual interest, 5 years:
Month 1: Interest = 50000 × 0.005 = $250, Principal = 966.64 − 250 = $716.64, Remaining balance = 50,000 − 716.64 = $49,283.36
Month 2: Interest = 49,283.36 × 0.005 = $246.42, Principal = 966.64 − 246.42 = $720.22, Remaining balance = 49,283.36 − 720.22 = $48,563.14
And so on, until the loan is fully paid.

FAQs – Amortization Calculator

1. What is an amortization schedule?
It is a table showing each loan payment split into principal and interest, along with the remaining balance.

2. Why does interest decrease over time?
Because as the principal decreases, the interest (calculated on the remaining balance) also decreases.

3. Can I use this calculator for mortgages?
Yes, it is perfect for mortgages, car loans, personal loans, or business loans.

4. Can I see the full loan payoff schedule?
Yes, the calculator provides a detailed month-by-month schedule.

5. How can I reduce total interest paid?
Increase monthly payments or shorten the loan term to reduce interest.

6. Does it handle different compounding periods?
Yes, you can adjust for monthly, quarterly, or annual compounding if needed.

7. Can I use it for loans with variable interest rates?
Yes, but for variable rates, you may need to adjust the interest rate as it changes.

8. Is the monthly payment always fixed?
For standard amortized loans, yes, unless the interest rate changes.

9. Can extra payments be added?
Yes, adding extra payments will reduce the remaining balance and total interest.

10. Is this calculator free and online?
Yes, it’s free, easy to use, and works on any modern browser.