1. What is the Amortization Formula?

The amortization formula calculates the remaining balance on a loan by considering the monthly payment, interest rate, and remaining term. It's essential for understanding how much principal remains to be paid on an existing loan.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( B \) — Remaining balance (USD)
• \( PMT \) — Monthly payment amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( remaining\_n \) — Remaining number of payments (months)

Explanation: The formula accounts for the present value of all remaining payments, discounted by the interest rate.

3. Importance of Loan Balance Calculation

Details: Knowing your remaining loan balance is crucial for refinancing decisions, loan modifications, or when considering early payoff. It helps borrowers understand their current equity position.

4. Using the Calculator

Tips: Enter your exact monthly payment, annual interest rate (as a percentage), and the remaining number of months on your loan. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does my calculated balance differ from my lender's statement?
A: Small differences may occur due to rounding, payment date variations, or if your lender uses a daily interest method.

Q2: Can I use this for any type of loan?
A: This works for standard amortizing loans (mortgages, auto loans). It doesn't apply to interest-only loans or credit cards.

Q3: How does extra payment affect the balance?
A: Extra payments reduce principal faster, decreasing the balance more than scheduled. This calculator shows the scheduled balance without extra payments.

Q4: What if my interest rate changes?
A: For adjustable-rate loans, you'll need to recalculate using the new rate and remaining term after each rate change.

Q5: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans with consistent payments, assuming no fees or payment changes.