1. What is an Amortization Schedule?

An amortization schedule is a complete table of periodic loan payments, showing the amount of principal and interest that comprises each payment until the loan is paid off at the end of its term.

2. How Does the Calculator Work?

The calculator uses the following formulas:

Where:

• \( Interest_k \) — Interest portion of payment for period k
• \( Principal_k \) — Principal portion of payment for period k
• \( Balance_k \) — Remaining balance after period k
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( PMT \) — Fixed monthly payment amount

3. Understanding the Results

Details: Early in the schedule, most of each payment is interest. Later in the schedule, most of each payment goes toward principal.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will show your monthly payment and the first year of the amortization schedule.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my payment go to interest at first?
A: This is how amortization works - interest is calculated on the outstanding balance, which is highest at the beginning of the loan.

Q2: How can I pay less interest overall?
A: Make extra principal payments when possible, which will reduce your total interest paid and may shorten your loan term.

Q3: What happens if I make a larger down payment?
A: A larger down payment reduces your loan amount, which decreases both your monthly payment and total interest paid.

Q4: Does this calculator account for variable interest rates?
A: No, this calculator assumes a fixed interest rate for the entire loan term.

Q5: How accurate is this calculator?
A: It provides accurate estimates for fixed-rate loans, but your actual loan terms may include additional fees or insurance.