1. What is Loan Amortization?

Amortization is the process of spreading out a loan into a series of fixed payments over time. This calculator determines the remaining balance at any point during the loan term.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( P \) — Principal loan amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total number of payments (months)
• \( t \) — Number of payments made (months)

Explanation: The formula calculates how much principal remains after t payments, accounting for both principal and interest components of each payment.

3. Importance of Amortization Calculation

Details: Understanding your remaining balance helps with financial planning, refinancing decisions, and evaluating prepayment options.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (annual rate ÷ 12), total loan term in months, and number of payments already made.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide the annual percentage rate (APR) by 12 (for months) and convert from percentage to decimal (e.g., 6% APR = 0.06/12 = 0.005 monthly).

Q2: What if I make extra payments?
A: Extra payments reduce principal faster, decreasing total interest. This calculator assumes regular payments only.

Q3: Why does early amortization seem slow?
A: Early payments are mostly interest. As principal decreases, more of each payment goes toward principal.

Q4: Can I use this for any loan type?
A: This works for standard amortizing loans (mortgages, auto loans). Doesn't apply to interest-only or balloon payment loans.

Q5: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans with consistent payments. Actual balances may vary with fees or rate changes.