Amortization Calculator
Detailed loan amortization breakdown showing principal vs. interest split over time.
Understanding Loan Amortization
Amortization is the process of spreading a loan into equal periodic payments. Each payment covers interest on the remaining balance and reduces the principal. Early payments are mostly interest, while later payments are mostly principal.
How It Works
For each payment period:
Interest portion = Remaining Balance × Monthly Rate
Principal portion = Monthly Payment − Interest portion
Example: $200,000 at 6% for 30 Years
| Payment # | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $1,199 | $1,000 | $199 | $199,801 |
| 180 | $1,199 | $623 | $576 | $124,033 |
| 360 | $1,199 | $6 | $1,193 | $0 |
In this example, you pay $231,677 in total interest. The first payment is 83% interest, while the last is nearly all principal. This is why extra payments early in the loan save the most money.
Frequently Asked Questions
Why is most of my early payment going to interest?
Interest is calculated on the remaining balance. With a large balance at the start, interest is high. As you pay down principal, the interest portion shrinks and more of each payment goes to principal.
How much can I save by making extra payments?
Even small extra payments can save thousands. On a $200,000 loan at 6% for 30 years, paying $100 extra per month saves about $45,000 in interest and pays off the loan 5 years early.
What is the difference between the loan calculator and amortization calculator?
The loan calculator gives you the monthly payment and totals. The amortization calculator provides a detailed breakdown showing how each payment splits between principal and interest.