1. What is an Amortization Schedule?

An 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:

• Outstanding Balance — Remaining principal at start of month ($)
• R — Monthly interest rate (APR / 12, as a decimal)
• D — Monthly payment ($)

Explanation: Each payment is divided between interest and principal repayment, with the interest portion decreasing and principal portion increasing over time.

3. Importance of Amortization

Details: Understanding amortization helps borrowers see how much they're paying in interest versus principal, plan for prepayments, and understand the true cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount, annual interest rate (APR), and loan term in months. The calculator will generate a complete payment schedule showing the breakdown of each payment.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my early payment go toward interest?
A: In the early stages of a loan, the outstanding balance is highest, so the interest calculated on that balance is also highest.

Q2: How can I pay less interest overall?
A: Making additional principal payments reduces the outstanding balance faster, which reduces the total interest paid over the life of the loan.

Q3: What's the difference between APR and interest rate?
A: APR includes both the interest rate and any additional fees or costs associated with the loan, giving a more complete picture of the loan's cost.

Q4: Can I use this for any type of loan?
A: This calculator works best for fixed-rate installment loans like mortgages, auto loans, or personal loans.

Q5: How does changing the loan term affect payments?
A: Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total interest.