Loan Amortization Calculator

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How to Use the Loan Amortization Calculator

This calculator shows you how a loan is paid off over time. It breaks down each payment into its principal and interest components. To use it, simply enter:

• Loan Amount ($): The total amount of money you are borrowing.
• Interest Rate (%): The annual interest rate for the loan.
• Loan Term (Years): The total duration of the loan.

Understanding Loan Amortization

Amortization is the process of spreading out a loan into a series of fixed payments over time. While your monthly payment amount stays the same, the composition of that payment changes dramatically over the life of the loan.

The Principal vs. Interest Split

Each payment you make consists of two parts:

• Principal: The portion of the payment that reduces your outstanding loan balance.
• Interest: The portion of the payment that serves as the lender's profit for lending you the money.

As you can see in the chart and the schedule above, at the beginning of your loan, a very large portion of your payment goes toward interest. As you pay down the loan, the balance shifts, and more and more of your payment goes toward paying down the principal. This is why your equity in a home builds slowly at first and then accelerates over time.

What To Do With Your Results

Understanding your amortization schedule is key to making smart financial decisions about your debt.

Visualize the True Cost of Your Loan

The "Total Interest Paid" figure is often a shocking number. It represents the total amount of money you will pay just for the privilege of borrowing. This visualization is a powerful motivator to pay off debt faster.

See the Power of Extra Payments

Even small extra payments can have a huge impact. By paying more than your required monthly payment, the extra amount goes directly toward the principal. This not only helps you pay off the loan faster but can also save you tens of thousands of dollars in interest over the life of the loan.

Compare Different Loan Terms

Use the calculator to compare a 30-year loan versus a 15-year loan for the same amount. While the monthly payment for a 15-year loan is higher, the total interest paid is dramatically lower. Seeing the amortization schedule can help you decide if the long-term savings are worth the higher monthly cost.