Loan Amortization Calculator
Break down every mortgage or personal loan payment into principal and interest, and see exactly how extra monthly payments can shorten your payoff timeline and reduce total interest paid.
About this calculator
Loan amortization spreads equal monthly payments over a fixed term so that early payments are mostly interest and later payments are mostly principal. The standard monthly payment formula is: M = P × (r × (1+r)^n) / ((1+r)^n − 1), where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of months. Adding an extra monthly payment reduces the outstanding principal faster, which lowers the interest charged in every subsequent period. Over a 30-year mortgage, even a small extra payment each month can save tens of thousands of dollars in interest. The amortization schedule produced by this formula shows the precise balance remaining after each payment.
How to use
Suppose you borrow $200,000 at 6% annual interest for 30 years with no extra payment. Monthly rate r = 6/100/12 = 0.005, n = 360. M = 200,000 × (0.005 × 1.005^360) / (1.005^360 − 1) = 200,000 × (0.005 × 6.0226) / (6.0226 − 1) = 200,000 × 0.030113 / 5.0226 ≈ $1,199.10 per month. Now add a $100 extra payment: total monthly outgoing = $1,299.10. The extra principal reduces your balance faster, cutting roughly 4 years off the loan and saving about $26,000 in interest.
Frequently asked questions
How does making extra monthly payments reduce total loan interest?
Every extra dollar you pay goes directly toward reducing the outstanding principal balance. Because interest each month is calculated as the remaining balance multiplied by the monthly rate, a lower balance means less interest accrues. This creates a compounding benefit: each reduced-interest period leaves an even smaller balance for the next period. Over a 30-year loan, consistent extra payments can eliminate years of payments and save tens of thousands of dollars.
What is an amortization schedule and why should I review it?
An amortization schedule is a complete table showing each monthly payment broken into its principal and interest components, along with the remaining balance after each payment. Reviewing it helps you understand how slowly principal shrinks in the early years — on a 30-year loan at 6%, roughly 83% of your first payment is interest. It also lets you identify the exact payoff date and total interest cost so you can make informed decisions about refinancing or extra payments.
When does it make financial sense to refinance a loan?
Refinancing generally makes sense when you can secure an interest rate at least 0.5–1 percentage point lower than your current rate and you plan to stay in the home or keep the loan long enough to recoup closing costs. Use the break-even point: divide total closing costs by monthly savings to find how many months until you come out ahead. If you're deep into an amortization schedule, refinancing resets the interest-heavy early years, which can sometimes cost more overall even with a lower rate.