Amortization Calculator
Simulate loan principal and interest repayment structures
How to Use This Calculator
- Enter the total Loan Amount borrowed.
- Input the annual Interest Rate provided by your lender.
- Set the Loan Term in years (e.g., 15 or 30 years).
- Click “Calculate Amortization” to generate your fixed monthly installment.
The Formula Used
Monthly payment is calculated using the standard fixed-rate amortization equation:
Where: M = Monthly Payment, P = Principal, r = Monthly Interest Rate, n = Total Payments (Months).
Frequently Asked Questions (FAQ)
What does loan amortization mean?
Amortization is the schedule of paying off a debt with regular payments over time so that each installment covers both principal and interest.
Why do early payments go mostly toward interest?
Interest is calculated on the remaining loan balance. Since the balance is highest at the beginning, the interest portion is larger initially.
Does this payment include property taxes and insurance?
No, this calculation reflects principal and interest (P&I) only. Escrow items like tax and insurance are extra.
How can extra payments shorten an amortization term?
Extra payments reduce the underlying principal directly, reducing total interest calculated for subsequent periods.
Is this amortization model valid for commercial loans?
Yes, provided the loan features fixed interest and equal recurring payment periods.