1. What is Personal Loan Amortization?

Personal loan amortization is the process of paying off debt with regular payments over time. The amortization schedule shows how each payment is split between principal and interest, with more interest paid early in the loan term.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)
• \( PMT \) — Monthly payment amount (USD)

Explanation: This formula accounts for compound interest and ensures the loan is paid off exactly at the end of the term.

3. Importance of Amortization Calculation

Details: Understanding your amortization helps with budgeting, shows the true cost of borrowing, and demonstrates how extra payments can reduce total interest paid.

4. Using the Calculator

Tips: Enter the total loan amount, annual interest rate (APR), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: APR includes both interest rate and any fees, representing the true annual cost of borrowing.

Q2: How can I pay less interest overall?
A: Make additional principal payments when possible, choose shorter loan terms, or negotiate lower rates.

Q3: Why does most of my early payment go toward interest?
A: This is how amortization works - interest is calculated on the outstanding balance, which is highest at the start.

Q4: Are there prepayment penalties?
A: Some loans have prepayment penalties - check your loan agreement before making extra payments.

Q5: How does loan term affect my payment?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest.