1. What is an Amortization Table?

An amortization table shows the breakdown of each loan payment into interest and principal components, along with the remaining balance after each payment. It helps borrowers understand how their payments are applied over the life of the loan.

2. How Does the Calculator Work?

The calculator uses these amortization formulas:

Where:

• \( Interest_k \) — Interest portion of payment k
• \( Principal_k \) — Principal portion of payment k
• \( Balance_k \) — Remaining balance after payment k
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( PMT \) — Fixed monthly payment amount

Explanation: Each payment first covers the interest due on the outstanding balance, with the remainder applied to reduce the principal.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see how much interest they'll pay over the loan term and how extra payments can reduce total interest and shorten the loan term.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will generate a complete amortization schedule showing each payment's breakdown.

5. Frequently Asked Questions (FAQ)

Q1: Why does early interest seem so high?
A: Early payments have higher interest portions because the outstanding balance is at its maximum.

Q2: How can I pay less interest overall?
A: Make extra principal payments to reduce the balance faster, which reduces total interest paid.

Q3: What's the difference between interest rate and APR?
A: APR includes both interest rate and any loan fees, giving a more complete cost picture.

Q4: Does a longer term mean lower payments?
A: Yes, but you'll pay more interest over the life of the loan.

Q5: How accurate is this calculator?
A: It provides standard amortization calculations; actual loan terms may vary slightly based on lender policies.