Loan Amortization Calculator Printable

Loan Amortization Formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

Total Payment:

Total Interest:

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1. What is Loan Amortization?

Loan amortization is the process of paying off a debt over time through regular payments. An amortization schedule shows how each payment is split between principal and interest, and how the loan balance decreases over time.

2. How Does the Calculator Work?

The calculator uses the standard loan amortization formula:

\[ PMT = P \times \frac{r \times (1 + r)^n}{(1 + r)^n - 1} \]

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 both principal and interest.

3. Importance of Amortization Calculation

Details: Understanding amortization helps borrowers see the true cost of loans, plan their finances, and make informed decisions about prepayments or refinancing.

4. Using the Calculator

Tips: Enter the principal amount, annual interest rate, and loan term in years. The calculator will compute your monthly payment, total payment, and total interest paid over the life of the loan.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between principal and interest?
A: Principal is the original loan amount borrowed. Interest is the cost of borrowing that money, calculated as a percentage of the remaining principal.

Q2: How can I pay less interest overall?
A: You can pay less interest by choosing a shorter loan term, making extra principal payments, or securing a lower interest rate.

Q3: Why does most of my early payment go toward interest?
A: In the beginning, your balance is highest so interest charges are largest. As you pay down principal, less goes toward interest each month.

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

Q5: Are there loans that don't amortize?
A: Yes, interest-only loans and balloon loans have different payment structures that don't fully amortize over their terms.