1. What is an Amortization Calculator?

The Amortization Calculator for Personal Loan calculates your monthly loan payments and generates a complete payment schedule. It shows how much of each payment goes toward principal and interest over the life of the loan.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

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

Explanation: The formula calculates the fixed monthly payment required to fully repay a loan over its term, accounting for both principal and interest.

3. Importance of Loan Amortization

Details: Understanding your amortization schedule helps you see the true cost of borrowing, plan your finances, and potentially save money by making extra principal payments.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate as a percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing principal, while APR includes interest plus other loan fees, representing the total annual cost.

Q2: How can I pay less interest on my loan?
A: Make extra principal payments, choose a shorter loan term, or refinance at a lower interest rate when possible.

Q3: Why does most of my early payment go toward interest?
A: With amortizing loans, interest is calculated on the outstanding balance, which is highest at the beginning of the loan term.

Q4: What happens if I make an extra payment?
A: Extra payments reduce the principal faster, decreasing total interest paid and potentially shortening the loan term.

Q5: Are there loans that don't amortize?
A: Yes, interest-only loans and balloon loans have different payment structures that don't fully amortize over the term.