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 standard loan payment formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of months (term in years × 12)

Explanation: The formula calculates the fixed monthly payment required to fully amortize a loan over its term.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see how much of each payment goes toward interest versus principal, and how the loan balance decreases over time.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why does most of the early payment go toward interest?
A: In the early stages of a loan, the outstanding balance is higher, so the interest portion of the payment is larger. Over time, as the balance decreases, more of each payment goes toward principal.

Q2: How can I pay less interest overall?
A: Making additional principal payments or choosing a shorter loan term will reduce total interest paid.

Q3: What's the difference between APR and interest rate?
A: The interest rate is the cost to borrow the principal, while APR (Annual Percentage Rate) includes the interest rate plus other loan fees.

Q4: Can I change my payment amount after getting a loan?
A: Fixed-rate loans have consistent payments, but you may be able to refinance or make extra payments to change the amortization schedule.

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