What is an amortization schedule?
An amortizing loan is repaid in equal monthly payments, each covering that month’s interest plus some principal. Because interest is charged on the remaining balance, the split changes every month: early payments are mostly interest and later payments are mostly principal. The schedule above shows that shift year by year, with the balance left at the end of each year. Mortgages, auto loans and most personal and student loans work this way.
How to use the calculator
- Loan amount — the amount borrowed, or the current balance if you are partway through a loan.
- Interest rate — the annual rate on the loan.
- Loan term — years until the loan is paid off (or years remaining, with your current balance).
- Extra monthly payment — optional. Enter an amount to see how many months and how much interest it saves.
The formulas
The monthly payment is M = P × r ÷ (1 − (1 + r)−n), where P is the loan amount, r the annual rate ÷ 12 and n the number of monthly payments. Each month:
- Interest = balance × r
- Principal = M − interest (+ any extra payment)
- New balance = balance − principal
Worked example: the first three payments
A $250,000 loan at 6.5% for 30 years has a payment of $1,580.17. The monthly rate is 0.065 ÷ 12 ≈ 0.5417%, so the first month’s interest is $250,000 × 0.005417 = $1,354.17.
| Payment | Interest | Principal | Balance |
|---|---|---|---|
| 1 | $1,354.17 | $226.00 | $249,774.00 |
| 2 | $1,352.94 | $227.23 | $249,546.77 |
| 3 | $1,351.71 | $228.46 | $249,318.31 |
Only about 14% of the first payment reduces the balance. Principal does not overtake interest until payment 233, in year 20. Over the full term the interest adds up to $318,861.
What extra payments do
Every extra dollar goes straight to principal, which lowers the interest charged in every month that follows. The savings snowball, as this comparison for the same loan shows:
| Extra per month | Payoff time | Total interest | Interest saved |
|---|---|---|---|
| None | 30 years | $318,861 | — |
| $100 | 25 years, 4 months | $260,001 | $58,860 |
| $250 | 20 years, 10 months | $206,265 | $112,596 |
| $500 | 16 years, 3 months | $155,345 | $163,516 |
Extra payments made early in the loan save the most, because they remove principal that would otherwise collect interest for decades.
Tips for paying a loan off early
- Label extra money as principal. Some servicers treat an unlabeled overpayment as an early payment of next month’s installment instead of reducing the balance.
- Check for a prepayment penalty. Most U.S. mortgages no longer have one, but some personal and auto loans do.
- Biweekly payments — half a payment every two weeks — add up to 26 half payments, or 13 full payments a year. That is the same as adding one-twelfth of a payment each month.
- Keep priorities straight. An emergency fund and higher-rate debt come first: paying off a credit card at 22% saves more than prepaying a 6.5% mortgage.
The schedule assumes a fixed rate and on-time payments. Lenders round each month’s interest to the cent, so their figures can differ from these estimates by a few cents.
Frequently asked questions
Why is so much of my early payment interest?
Interest is charged on the outstanding balance, which is largest at the start. As the balance falls, each month’s interest shrinks and more of the same payment goes to principal.
Does an extra payment lower my monthly payment?
Not on a standard loan — the payment stays the same and the loan ends sooner. Some mortgage lenders offer a recast, which re-amortizes the lower balance into a smaller payment for a small fee.
Is it better to pay extra on my loan or invest?
Prepaying earns a guaranteed return equal to the loan’s rate. Investing may earn more over time but with risk. Many people compare the rate to their expected return and split the difference. A financial professional can help you weigh it.
Can I use this for a loan I already have?
Yes. Enter your current balance as the loan amount and the years remaining as the term. The schedule then starts from today.
What is negative amortization?
It happens when a payment does not cover the month’s interest, so the unpaid interest is added to the balance and the debt grows. Standard fixed-rate loans like the ones this calculator models never negatively amortize.
Last updated: October 8, 2026