Amortization Calculator
What is Loan Amortization?
Loan amortization is the process of paying off a loan over time through regular payments. Each payment covers both interest and principal, gradually reducing the balance until the loan is fully repaid. Amortization is commonly used for mortgages, auto loans, and personal loans to help borrowers understand how much they'll pay each month and how their balance decreases over time.
How to Use the Amortization Calculator
- Type your Loan Amount – the total amount you want to borrow.
- Type your Interest Rate – the annual percentage rate (APR) from your lender.
- Type your Loan Term – the number of years or months you'll take to repay the loan.
- Select your Start Date to see when payments begin.
- Click Calculate to see your monthly payment, total interest, and a full amortization schedule.
The How To Calculate Amortization Calculator is designed for clarity and ease of use. Instantly see results and compare different loan scenarios for smarter financial planning.
How is Loan Amortization Calculated? (Formula Explained)
The calculator uses the standard amortization formula for fixed-rate loans:
Where:
P = Loan amount (principal)
r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
n = Total number of payments (months)
Each payment is split between interest and principal. Over time, the interest portion decreases and the principal portion increases.
Example: Loan Amortization Calculation Step-by-Step
Let's say Jamie borrows $200,000 at a 5% annual interest rate for 30 years:
- Loan amount: $200,000
- Interest rate: 5%
- Loan term: 30 years (360 months)
- Monthly rate: 5% ÷ 12 ÷ 100 = 0.0041667
- Monthly Payment = [200,000 × 0.0041667] / [1 - (1 + 0.0041667)-360] ≈ $1,073.64
Jamie's estimated monthly payment is $1,073.64. The amortization schedule shows how much goes to interest and principal each month, and how the balance drops over time.
Why Loan Amortization Matters for You
- Plan your monthly and yearly finances
- See how much interest you'll pay over the life of the loan
- Compare different loan terms and interest rates
- Decide if making extra payments or refinancing is right for you
Normal / Optimal / Average Ranges
- Typical loan term: 15–30 years for mortgages, 3–7 years for auto loans
- Interest rate: 3% – 10% (varies by loan type and credit score)
- Monthly payment: Varies by loan amount, rate, and term
Benefits of Tracking Your Loan Amortization
- See how extra payments reduce interest and payoff time
- Plan for large expenses or early payoff
- Understand the true cost of borrowing
- Make informed decisions about refinancing or new loans
Limitations of This Calculator
- Assumes a fixed-rate loan (not for variable rates)
- Doesn't include taxes, insurance, or fees
- Results are estimates – actual payments may vary
- Doesn't account for prepayment penalties or lender fees
FAQs About the Amortization Calculator
- Is the amortization calculator accurate?
It uses standard formulas for fixed-rate loans. For the most accurate results, enter your exact loan details. - Can I use this for mortgages or auto loans?
Yes, just enter your loan details. Rates and terms may vary by loan type. - How often should I check my amortization schedule?
Check whenever you're considering a new loan, refinancing, or making extra payments. - Does this calculator include taxes and insurance?
No, it estimates principal and interest only. Add fees and insurance for a full payment picture. - What's the difference between APR and interest rate?
APR includes some fees, giving a more complete cost picture. Interest rate is just the lender's charge. - Can I pick a custom start date?
Yes! Use the date picker to select your loan's start date. - What parameters do I need to use this calculator?
You'll need your loan amount, interest rate, loan term, and start date.
Amortization Calculator – Free Online Tool
The How To Calculate Amortization Calculator is a free, accurate, and easy-to-use tool for borrowers, homeowners, and anyone considering a loan. Instantly estimate your monthly payments, total interest, and see a full amortization schedule. Use it to plan, compare, or refinance with confidence.