Loan amortization calculator

Find the payment, the total interest, and the two numbers most schedules hide: the month your principal finally beats your interest, and how much of the interest is packed into the front of the loan.

How the math works

An amortizing loan has one level payment for its whole life. Each payment is split two ways: the interest owed on the balance since last month, and whatever is left, which goes to principal. As the balance falls, the interest slice shrinks and the principal slice grows. The payment never moves; the split inside it does, every single month.

The payment itself comes from the standard amortization formula.

Where M is the monthly payment, P is the loan amount, i is the monthly rate (annual APR divided by 12), and n is the number of payments (years times 12). To find the split, the calculator walks the loan month by month: interest is the balance times i, principal is M minus that interest, and the balance drops by the principal. The crossover month is the first payment where the principal slice is at least as big as the interest slice — the point where the loan finally starts working for you instead of the lender.

Worked example

Take a $320,000 loan at the 6.85% Freddie Mac 30-year average. The payment is about $2,096.83 a month, and over the full term you pay roughly $434,858 in interest — more than the amount you borrowed.

Now look inside the first payment. Of that $2,096.83, about $1,826.67 is interest and only $270.16 is principal. Eighty-seven cents of your first dollar go to the lender. That ratio improves every month, but slowly: the principal slice does not overtake the interest slice until month 240 — year 20 of 30. For the first two-thirds of the loan, more than half of every payment is interest.

The front-loading shows up in the totals too. About 47.2% of all the interest on this loan is paid in the first third of the term — the first 10 years. That is the number a plain schedule table makes you count by hand, and it is the reason an extra dollar of principal early in the loan cancels far more future interest than the same dollar paid near the end.

When this calculator is wrong

The schedule above assumes a fixed rate and a payment that never changes and never misses. Real loans bend that in a few ways:

• Front-loading is not the same on every loan. It scales with rate and term. A 5-year auto loan at 8.40% crosses over at the first payment — principal beats interest immediately, because the term is short. A 10-year student loan at 6.53% is barely front-loaded. Only long, high-rate loans like a 30-year mortgage push the crossover out to year 20. If your loan is short, paying extra early does far less for you; the interest was never that front-loaded to begin with.
• Variable-rate loans don't follow one schedule. Adjustable-rate mortgages, most private student loans, and credit lines reprice on a schedule or an index. The amortization here is a snapshot at today's rate. When the rate moves, the whole split is redrawn.
• The nominal rate isn't the true cost. This calculator uses the interest rate, not the APR that folds in origination fees, points, and mandatory charges. On a loan with a 2% origination fee, your real borrowing cost is higher than the interest line shows. Compare loans on APR, not the headline rate.
• Extra payments change everything. The schedule assumes exactly the scheduled payment, on time, every month. Any extra principal shortens the term and cuts total interest, and because of the front-loading, a payment in year 2 does far more than the same payment in year 25. This tool shows the baseline; it does not model prepayment.

What to do with the result

Read the crossover month first. If it sits far out — year 15, year 20 — your loan is heavily front-loaded, and the practical move is to attack principal early. An extra $270.16 in month 1 of the example above erases a full month of scheduled principal and every dollar of interest that month would have earned across the remaining term. The same extra payment in year 28 saves almost nothing, because by then the payment is nearly all principal anyway.

The crossover number also reframes refinancing. Refinancing a mortgage a few years in doesn't just change the rate — it resets the amortization clock, dropping you back at the front of a new schedule where interest dominates again. That can still be worth it on a large enough rate cut, but the break-even is longer than the monthly-payment drop suggests. On a typical $4,000 refinance cost at a half-point rate drop on a $300,000 balance, the break-even runs 4 to 5 years, and most people move or refinance again before they get there. The math tends to work only on rate drops of a full point or more. Run the all-in total, not the payment change.

Common questions

What does it mean to amortize a loan?

To amortize a loan is to pay it off in equal installments that each cover the interest owed plus a share of principal. The payment stays constant; early on it is mostly interest, and by the end it is mostly principal. When the last payment clears, the balance is exactly zero.

Why is so much of my early payment interest?

Because interest is charged on the balance, and the balance is at its highest at the start. On a $320,000 loan at 6.85%, the first month's interest alone is about $1,826.67. As you chip the balance down, there is less to charge interest on, so the interest slice shrinks and the principal slice grows.

When does principal exceed interest in my payment?

It depends on the rate and the term. On a 30-year mortgage at 6.85% it is month 240, year 20. On a 5-year auto loan it is the first payment. The higher the rate and the longer the term, the later the crossover — which is exactly what the calculator above computes for your numbers.

Does paying extra principal early save more than paying it later?

Yes, and the gap is large on a front-loaded loan. An extra principal payment removes that dollar from the balance for the rest of the term, so the interest it would have accrued never happens. Because early balances are highest, an early extra payment cancels the most future interest. Late in the loan there is little interest left to cancel.

Is the interest rate the same as the APR?

Not always. The interest rate sets the amortization math; the APR adds origination fees, points, and mandatory costs, so it is usually higher. This calculator uses the interest rate. When comparing loan offers, compare APRs — that is the number that reflects the true cost of borrowing.