1. What is Loan Amortization?

Loan amortization is the process of paying off a debt over time through regular payments. Each payment covers both interest and principal, with the interest portion decreasing and principal portion increasing over the life of the loan.

2. How Does the Calculator Work?

The calculator uses the standard amortization formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total 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 compound interest.

3. Importance of Amortization Schedule

Details: Understanding your amortization schedule helps you see how much of each payment goes toward interest versus principal, plan for refinancing, and understand the true cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (as a percentage), and loan term in years. The calculator will show your monthly payment, total repayment amount, and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: How does making extra payments affect my loan?
A: Extra payments reduce the principal faster, decreasing total interest paid and potentially shortening the loan term.

Q2: What's the difference between interest rate and APR?
A: The interest rate is the cost of borrowing, while APR includes fees and other loan costs, representing the true annual cost.

Q3: How does loan term affect my payments?
A: Shorter terms mean higher monthly payments but less total interest. Longer terms have lower payments but cost more in interest.

Q4: What is an amortization schedule?
A: A table showing each payment's breakdown between principal and interest, and the remaining balance after each payment.

Q5: Can I get a full amortization schedule?
A: This calculator shows summary information. For a full schedule, you would need to see each month's payment breakdown.