1. What is a Loan Amortization Schedule?

A loan amortization schedule is a complete table of periodic loan payments, showing the amount of principal and interest that comprises each payment until the loan is paid off at the end of its term.

2. How Does the Calculator Work?

The calculator uses the following formulas:

Where:

• \( Interest_k \) — Interest portion of payment in period k
• \( Principal_k \) — Principal portion of payment in period k
• \( Balance_k \) — Remaining balance after period k
• \( r \) — Periodic interest rate (annual rate / 12)
• \( PMT \) — Fixed periodic payment amount

Explanation: Each payment is split between interest (based on current balance) and principal (the remainder). Over time, the interest portion decreases while the principal portion increases.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see how much they're paying in interest versus principal, plan for refinancing, and understand the impact of extra payments.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate, and loan term in years. The calculator will generate a complete payment-by-payment breakdown.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go toward interest?
A: This is normal in amortizing loans - interest is calculated on the current balance, which is highest at the beginning.

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

Q3: What's the difference between term and amortization period?
A: They're usually the same for personal loans, but can differ for some mortgage products.

Q4: Does this work for credit cards or interest-only loans?
A: No, this calculator is for fixed-rate, fully amortizing loans with equal payments.

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