Loan Payment Calculator
Compare your loan scenarios: Original, Refinancing, and Extra Payments
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Extra Payment Options
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Dynamic Payment Breakdown
See how your payments are distributed between principal and interest over time
Original Loan Payment Breakdown
Understanding the Payment Breakdown
- Principal: The portion of your payment that reduces the loan balance.
- Interest: The portion of your payment that goes toward interest costs.
- Extra Payments: Additional payments that reduce principal directly.
- Remaining Balance: The loan balance that remains after each payment.
Notice how in the early years of your loan, most of your payment goes toward interest. As time passes, more of your payment goes toward reducing the principal.
Adding extra payments helps you pay down the principal faster, reducing the total interest paid over the life of the loan.
Understanding Loan Amortization
What is Amortization?
Amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment goes toward both the loan's principal amount and the interest on the loan. Early in the loan term, a larger percentage of each payment goes toward interest, while later in the loan term, a larger percentage goes toward paying down the principal.
The term "amortization" comes from the Latin word "amortizare," which means "to kill off." In financial terms, you're gradually killing off your debt by making regular payments that reduce both interest and principal until your balance reaches zero.
Key Components of Loan Amortization:
- Principal: The original amount borrowed or the balance remaining on your loan.
- Interest: The cost of borrowing the money, calculated as a percentage of the principal.
- Term: The length of time over which the loan will be repaid (typically in months or years).
- Payment amount: The fixed amount paid each period, usually monthly.
What is an Amortization Schedule?
An amortization schedule is a complete table of periodic loan payments showing the amount of principal and interest that comprise each payment until the loan is paid off at the end of its term. Each periodic payment is the same amount in total, but the portion going to principal increases while the portion going to interest decreases over the life of the loan.
Amortization schedules are useful tools for understanding how your loan balance will decrease over time and how much of your payments are applied to interest versus principal at any point during the loan term.
An Amortization Schedule Shows You:
- Payment dates and amounts (typically shown monthly or yearly)
- Breakdown of how much of each payment goes to principal
- Breakdown of how much of each payment goes to interest
- Running total of interest paid to date
- Remaining loan balance after each payment
Why Understanding Amortization Matters
For Extra Payments
Understanding amortization helps you see how making extra payments toward your principal can save you significant money on interest and shorten your loan term. Because interest is calculated on the remaining principal, reducing the principal faster through extra payments means less interest accrues over time.
For Refinancing
When considering refinancing, an amortization schedule helps you compare your current loan with potential new loans. You can clearly see the impact of different interest rates and terms on your monthly payments, total interest costs, and payoff timeline.
Our calculator above generates amortization schedules for your current loan and different scenarios, allowing you to visualize how changes affect your loan payments and interest costs.