Loan Schedule
Calculate payments and view amortization.
What is a Loan Amortization Schedule?
At its core, amortization is the process of spreading out a loan into a series of fixed payments over a specific period of time. While your monthly payment amount usually stays the same, the composition of that payment changes drastically over the life of the loan.
Think of your loan payment like a bucket filled with two different liquids: Interest (profit for the lender) and Principal (paying down the actual debt).
In the early years of your loan, the bucket is almost entirely filled with Interest. You are paying mostly for the privilege of borrowing the money. As time passes, the ratio shifts. By the end of the loan term, your bucket is filled almost entirely with Principal, and you are finally paying off the debt itself.
An Amortization Schedule is simply the roadmap that shows you exactly how this ratio changes month by month, from your very first payment to your last.
The Math Behind Loan Amortization Schedule
The math behind amortization ensures that the lender gets paid their interest upfront based on the current outstanding balance.
This is why you build equity slowly at the beginning of a mortgage or car loan.
The Core Formula
The standard formula used to calculate your fixed monthly payment (PMT) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where:
- M = Total monthly payment
- P = The principal loan amount
- i = Your monthly interest rate (Annual Rate divided by 12)
- n = Total number of payments (Loan Term in Years multiplied by 12)
How the Split Works
Once the total monthly payment (M) is determined, the calculator splits it using these two logic steps for every single month:
- Calculate Interest (IPMT): It takes the remaining loan balance and multiplies it by the monthly interest rate. This is the portion of your check that goes straight to the bank.
- Calculate Principal (PPMT): It subtracts the Interest amount from your total fixed payment (M). The remainder is what actually reduces your debt.
Because your loan balance drops slightly every month (thanks to step 2), the Interest calculated in step 1 becomes slightly smaller the next month. This leaves more room for Principal.
This “snowball effect” accelerates as the loan ages.
How to Use This Calculator
This tool is designed to provide an instant snapshot of your loan’s lifespan. Follow these simple steps:
- Enter Loan Amount: Input the total amount of money you are borrowing (e.g., the price of the home minus your down payment).
- Enter Annual Interest Rate: Input the rate quoted by your lender (e.g., 6.5). Do not include the percent sign.
- Enter Loan Term: Type in the number of years you will be paying this loan (e.g., 30 for a standard mortgage, 5 for a car loan).
- Click “Calculate Schedule”: The tool will instantly process the amortization logic.
- View the Breakdown: Click the “Show Monthly Breakdown” link to expand the full table. This allows you to scroll through every payment to see exactly when you start paying more principal than interest (the “tipping point”).
Interpreting Your Results
Understanding the output is key to making financial decisions. Here is what the numbers are telling you:
- Monthly Payment: This is your “Principal + Interest” (P&I) payment. Note: This often does not include escrow items like taxes or insurance (see Limitations below).
- Total Interest: This is the “cost of borrowing.” It is the total amount of extra money you will pay the bank over the life of the loan.
- Benchmark: On a 30-year mortgage with average rates, it is common for the Total Interest to equal 50% to 100% of the original loan amount. Seeing a number this high is normal, though shocking!
- Total Cost of Loan: This is the sum of everything you paid (Principal + Interest).
- The Tipping Point: Look at the schedule table. Find the month where the Principal column becomes higher than the Interest column. On a 30-year loan, this usually doesn’t happen until year 18 or 19!
Limitations
While this calculator is a powerful planning tool, it operates on a standard amortization model. Keep these real-world constraints in mind:
- Escrow is Excluded: For mortgages, your actual check written to the bank is often higher than the number shown here. This calculator does not include property taxes, homeowner’s insurance, or PMI (Private Mortgage Insurance).
- Fixed-Rate Only: This tool assumes your interest rate never changes. If you have an ARM (Adjustable Rate Mortgage), this schedule will only be accurate until your rate adjusts.
- No “Extra Payments”: This calculation assumes you pay exactly the required amount on the due date. It does not account for making extra principal payments, which can drastically shorten your loan term and reduce total interest.
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