Amortization Calculator
Key Terminology
Principal
The initial amount of money borrowed from a lender, excluding interest. Your payments gradually reduce this amount over time.
Interest Rate
The percentage charged by the lender for the use of their money. The Annual Rate is used to calculate the interest portion of each payment.
Loan Term
The total length of time you have to repay your loan, typically expressed in years.
Formulas Explained
Payment Calculation Formula
Payment = P [r(1+r)ⁿ] / [(1+r)ⁿ - 1]
- P = Principal Loan Amount
- r = Periodic Interest Rate (Annual Rate / Periods per Year)
- n = Total Number of Payments (Loan Term Years × Periods per Year)
Frequently Asked Questions
Extra payments are applied directly to your loan's principal balance. This reduces the balance faster, meaning you pay less total interest and can pay off your loan years sooner.
Paying more frequently (e.g., bi-weekly instead of monthly) results in more payments per year. This accelerates your principal reduction, saving you significant interest over the life of the loan. For example, 26 bi-weekly payments equal 13 full monthly payments, adding one extra payment per year.
This calculator uses standard industry formulas and is highly accurate for planning purposes. However, your lender's final figures may vary slightly due to factors like closing dates or specific fee structures. Always consult your official loan documents for exact figures.