Loan Payoff Schedule Calculator and How It Works

A loan payoff schedule shows how each payment is divided between interest and principal, and how the balance declines until the loan is repaid. Enter the loan amount, annual percentage rate (APR), and term to calculate the scheduled monthly payment and total interest; this calculator assumes equal monthly payments and a fixed rate.

Formula

The calculator uses the standard fixed-payment amortization formula. Monthly payment equals principal multiplied by the monthly interest rate, divided by one minus the quantity one plus the monthly rate raised to the negative number of payments:

PMT = P × r / [1 − (1 + r)−n]

• P is the original loan principal, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 12 ÷ 100.
• n is the number of monthly payments: loan term in years × 12.
• PMT is the calculated monthly payment, in dollars.

Total interest is estimated as PMT × n − P. The calculator uses the unrounded payment in this total-interest expression, so its displayed cents may differ slightly from a schedule that rounds every monthly payment to cents. An actual lender schedule may also use a different payment amount or timing.

Worked Example

Using the default inputs—$20,000 principal, 8% APR, and a five-year term—the monthly rate is 0.08 ÷ 12 = 0.0066667, and the number of payments is 5 × 12 = 60.

Substitute those values in the payment formula:

PMT = 20,000 × 0.0066667 ÷ [1 − (1.0066667)−60]

The resulting monthly payment is $405.53 when rounded to cents. Total interest is calculated using the unrounded formula payment: approximately $405.528 × 60 − $20,000 = $4,331.68. Thus, the calculator’s outputs are a $405.53 monthly payment and approximately $4,331.68 in total interest. A payment-by-payment schedule that rounds each installment can produce a slightly different final amount.

How a Loan Payoff Schedule Works

For a typical amortizing loan, interest accrues on the outstanding balance. At each payment, the interest portion is calculated first; the remainder reduces principal. As the balance shrinks, a fixed payment generally contains less interest and more principal. A payoff schedule lays out this process over time, often showing the payment number, opening balance, payment, interest, principal reduction, and closing balance.

For example, at the start of a loan, the balance is largest, so interest makes up a larger share of the installment. Later, more of the same-sized payment goes toward principal. The last payment may be adjusted slightly to clear the remaining balance exactly, depending on the lender’s rounding and accrual methods.

Reading the Schedule and Checking Payoff

The payment amount is not the same as the payoff balance. A payoff quote for a particular date can include interest accrued since the latest scheduled payment and other contract-specific amounts. The calculator estimates payments and interest across the stated term; it does not produce an official amount needed to close an account on a specific day.

To review a lender-provided schedule, check the starting principal, rate, payment frequency, due dates, and final payment. A useful reconciliation is that the principal portions across the schedule should add up to the amount borrowed, subject to rounding and any balance adjustments. Total payments minus principal gives the interest paid under the schedule.

When the Estimate May Differ

This estimate is most useful for understanding a loan with a fixed APR, equal monthly payments, and no changes during its term. Actual figures can differ when the contract uses daily interest accrual, irregular payment dates, a variable rate, a payment holiday, deferred interest, fees added to the balance, or a final balloon payment. APR may reflect certain borrowing costs, but this calculator treats the entered APR as the interest rate and does not separately model fees.

Extra payments also change the schedule. If an additional amount is applied directly to principal, the balance can fall faster and future interest may change, but the result depends on the loan terms and how the servicer applies the payment. This calculator has no extra-payment input, so its term and interest outputs describe scheduled payments only.

Common Questions About Payoff Schedules

A common misconception is that the first payment is entirely interest or that every month has the same interest charge. In a standard amortizing loan, each payment includes both interest and principal, and the interest portion usually declines as the balance is paid down. Another distinction: a repayment schedule is a projection, while the lender’s current payoff quote is the amount calculated for a particular date.

Assumptions

• The interest rate is fixed for the full term.
• Payments are equal, made monthly, and assumed to occur at the end of each monthly period.
• Interest compounds monthly at APR ÷ 12.
• Fees, taxes, insurance, PMI, escrow, late charges, extra payments, and payment-date adjustments are not included.

Frequently Asked Questions

What is a loan payoff schedule?
A loan payoff schedule is a timeline of payments showing how much goes to interest and principal and how the balance changes until repayment.

How do I calculate my monthly loan payment?
Use the fixed-payment amortization formula with the principal, monthly rate, and total number of monthly payments. The calculator applies that formula to the inputs above.

Does a payoff schedule include extra payments?
Not in this calculator. An extra payment can affect the balance and interest if it is applied to principal, but the effect depends on the loan’s terms and payment handling.

Why can my lender’s payoff amount differ from the balance shown?
A payoff quote is usually calculated for a specific date and may account for interest accrued since the last installment and contract-specific amounts. Request a dated quote from the lender or servicer for the amount required to pay off the loan.

Does APR always equal the rate used to calculate interest?
Not necessarily. APR can represent borrowing costs differently from the contract’s periodic interest rate. This calculator uses the APR entered as its annual interest-rate input, so confirm which rate belongs in the formula using the loan disclosure.

This result is an estimate; 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 | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2