Amortization Calculator

How Loan Amortization Works

An amortized loan has a fixed monthly payment that covers both interest and principal. In the early months, most of the payment goes toward interest because the outstanding balance is at its highest. As the balance decreases, the interest portion shrinks and the principal portion grows — the payment stays the same, but the split shifts. The monthly payment is calculated using the standard annuity formula: M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1), where P is the principal, r is the monthly interest rate, and n is the number of payments.

The Impact of Extra Payments

Extra monthly payments go directly toward reducing the principal balance, which reduces the interest charged on every subsequent payment. Even a modest extra payment — $100 or $200 per month on a 30-year mortgage — can shave years off the loan and save tens of thousands of dollars in interest. This calculator shows the exact impact: how many months you cut, how much interest you save, and when the loan pays off. The key insight is that extra payments have the most impact early in the loan, when the outstanding balance (and therefore the interest) is highest.

Financial System Integration

Loan amortization schedules are foundational to financial reporting, lease accounting (ASC 842), and payment processing systems. I build custom applications and integrations that generate schedules, manage payment allocations, and feed downstream accounting and reporting systems. See custom application development, explore custom reporting services, or get in touch.