Annual Loan Amortization Table: Formula and Example

An annual loan amortization table shows, year by year, how each annual payment is divided between interest and principal, and how the remaining balance declines. Enter the loan amount, annual interest rate, and term to calculate the annual payment, total interest, and a schedule of estimated balances.

Formula

For a fixed-rate loan with one level payment at the end of each year, the annual payment is calculated as:

A = P × i ÷ [1 − (1 + i)⁻ⁿ]

• A is the annual payment, in dollars.
• P is the starting loan principal, in dollars.
• i is the annual interest rate as a decimal; convert an APR entered as a percentage by dividing by 100.
• n is the number of annual payments, equal to the term in years.

The total interest in this estimate is A × n − P, using the displayed payment rounded to cents. The balance after one payment is P × (1 + i) − A: interest accrues for the year, then the payment is applied. The schedule below uses cent-rounded annual payments and rounds displayed balances to cents; small rounding differences can arise in the final payment.

Worked Example

Using the calculator defaults—$20,000 principal, 8% annual APR, and five years—the annual rate as a decimal is 0.08, and there are five annual payments.

1. Annual payment: $20,000 × 0.08 ÷ [1 − (1.08)⁻⁵] = $5,009.12.
2. Total interest using the rounded payment: $5,009.12 × 5 − $20,000 = $5,045.60.
3. Balance after the first payment: $20,000 × 1.08 − $5,009.12 = $16,590.88.

The payment is the headline result: $5,009.12 per year. The total interest is $5,045.60, and the first-year ending balance is $16,590.88.

Annual Amortization Table

Each year’s interest is the opening balance multiplied by 8%. Principal repaid is the annual payment minus that year’s interest. Subtract principal repaid from the opening balance to find the closing balance.

Year	Opening balance	Payment	Interest	Principal repaid	Closing balance
1	$20,000.00	$5,009.12	$1,600.00	$3,409.12	$16,590.88
2	$16,590.88	$5,009.12	$1,327.27	$3,681.85	$12,909.03
3	$12,909.03	$5,009.12	$1,032.72	$3,976.40	$8,932.63
4	$8,932.63	$5,009.12	$714.61	$4,294.51	$4,638.12
5	$4,638.12	$5,009.12	$371.05	$4,638.07	$0.05*

*The five equal payments leave a five-cent difference because calculations round to cents along the way. A real loan’s final payment may be adjusted by the lender to clear the remaining balance. The table is an estimate, not a statement of the amount due.

How Annual Amortization Works

Amortization is the scheduled repayment of principal over time. At the beginning of a conventional fixed-rate amortizing loan, the outstanding balance is larger, so more of each payment goes to interest. As the balance falls, the interest portion generally shrinks and more of the same payment goes toward principal. The pattern depends on the payment schedule and the agreement’s interest calculation.

For each period, the basic schedule calculations are:

• Interest for the year = opening balance × annual rate.
• Principal paid = payment − interest for that year.
• Closing balance = opening balance − principal paid.

This table assumes one payment per year. It is not interchangeable with a monthly amortization schedule merely by multiplying a monthly payment by 12. Monthly payments typically use a monthly rate and reduce the balance throughout the year, changing the timing of interest and principal.

When to Use an Annual Table

An annual table can help when a loan agreement calls for yearly payments, or when you want a high-level view of principal reduction across years. It can also help you check the mechanics of a fixed-rate, fully amortizing loan. Use the payment frequency and interest convention in the actual loan terms: a loan with monthly, quarterly, or irregular payments needs a schedule built for those periods.

To read the result, focus on the opening balance, interest, principal repaid, and closing balance for each year. The payment stays level in this simplified example, but its split changes. Total interest is the sum of scheduled payments minus the original principal, provided the loan is repaid entirely through those payments and no other charges or adjustments apply.

Common Errors and Limits

• Mixing annual and monthly figures: The formula uses an annual rate and annual payment periods. Do not enter a monthly payment or use a monthly rate without rebuilding the formula.
• Confusing APR with the effective annual yield: This estimate treats the entered APR as the rate applied once per annual period. Loan contracts may define accrual and compounding differently.
• Rounding too early: Rounding each year’s interest and balance to cents can create a small residual in the last row. Lenders may use more precise calculations and adjust the final payment.
• Assuming every loan amortizes fully: Interest-only periods, balloon payments, variable rates, skipped payments, fees added to principal, or extra payments can produce a different schedule.

The calculator does not infer a lender’s payment dates, day-count method, compounding rules, or fees. For a contract comparison or payoff figure, use the actual terms and request an itemized schedule or current balance from the lender.

Assumptions

• The interest rate is fixed for the full term.
• One equal payment is made at the end of each year.
• Interest is treated as annual, at the entered APR, applied once per annual period.
• Fees, taxes, insurance, PMI, escrow, late charges, and extra payments are not included.

Frequently Asked Questions

How do I calculate an annual loan payment?
Use A = P × i ÷ [1 − (1 + i)⁻ⁿ], where P is principal, i is the annual rate as a decimal, and n is the number of annual payments.

How do I make an amortization table in a spreadsheet?
List each year’s opening balance. Calculate interest as opening balance times the annual rate, principal as payment minus interest, and closing balance as opening balance minus principal. Carry each closing balance to the next row.

Is an annual payment the same as 12 monthly payments?
No. Monthly payments are applied at different times and usually use a monthly rate. Multiplying a monthly payment by 12 does not reproduce the same balance path as one annual payment.

Why does the last balance not equal exactly zero?
Displayed figures are rounded to cents, and repeated rounding can leave a small remainder or overpayment. Actual loan servicing may calculate with greater precision and adjust the final amount.

Does this table include fees or extra payments?
No. It models only scheduled payments and interest under the stated assumptions. Fees, additional principal payments, rate changes, and other contract terms require a different calculation.

This result is an estimate, and the lender’s disclosure gives the exact figures.

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Annual payment | $ | p * (apr / 100) / (1 - (1 + apr / 100) ^ -yrs) | 2
out int | Total interest | $ | pmt * yrs - p | 2
out bal | Balance after one annual payment | $ | p * (1 + apr / 100) - pmt | 2