How amortization actually works
With an amortized loan you make the same payment every month, but what that payment buys changes constantly. Interest is charged on the balance you still owe, so when the balance is high — at the start — most of your payment is interest and only a sliver pays down principal. As the balance drops, the interest charge shrinks and more of each payment goes to principal, until the loan clears.
The payment formula
M = P · r(1 + r)n ÷ ((1 + r)n − 1)
where P = loan amount, r = monthly rate (annual rate ÷ 12), and n = number of monthly payments. Each month the interest portion is the current balance × r; the rest of the payment (plus any extra) reduces the balance.
What makes this calculator different
- The full monthly schedule. Not just yearly totals — every single payment, split into principal and interest, with the running balance. Show all of it or just the first year.
- The crossover point, pinpointed. We find and highlight the exact month your payment tips from mostly-interest to mostly-principal — the moment you start building real equity.
- Extra-payment impact. Add a monthly extra and see how many months and how much interest you save versus the baseline.
- Export everything. Download the complete month-by-month schedule as CSV — month, payment, principal, interest, and balance for the life of the loan.
Frequently asked questions
What is loan amortization?+
Amortization is the process of paying off a loan with regular, equal payments over a set term. Each payment is split between interest — the cost of borrowing what you still owe — and principal, which reduces the balance. Because interest is charged on the remaining balance, the split shifts over time: early payments are mostly interest, and later ones are mostly principal. The amortization schedule is the month-by-month table showing exactly how each payment is divided and how the balance burns down to zero.
Why are early payments mostly interest?+
Interest each month is calculated on the balance you still owe, which is highest at the start. With a large balance, most of a fixed payment is eaten up covering that month’s interest, leaving only a little to chip away at principal. As the balance falls, the interest charge shrinks and a growing share of the same payment goes to principal — which is why the schedule accelerates near the end.
What is the crossover point?+
The crossover point is the first month in which more of your payment goes to principal than to interest. Before it, the loan is interest-heavy; after it, you build equity faster with every payment. This calculator pinpoints and highlights that month for you — on a typical 30-year loan it can land well past the halfway mark, which surprises a lot of borrowers.
How do extra payments help?+
Any amount you pay above the scheduled payment goes straight to principal. That permanently removes all the future interest that principal would have accrued and brings the crossover point forward, so you reach payoff sooner. Even a modest extra amount each month can shave years off the term and save a substantial sum in interest — enter an amount to see your specific savings.
How is amortization different from simple interest?+
Simple interest is charged on the original principal for the whole term, so the interest figure never changes. Amortized interest is recalculated each period on the declining balance, so it falls as you pay the loan down. Nearly all mortgages, auto loans, and personal instalment loans are amortized, which is why paying extra early — when the balance and therefore the interest are largest — has the biggest effect.
Disclaimer: This calculator is for educational purposes only. Actual rates, fees, and terms vary by lender and credit profile, and payment conventions differ slightly by product and jurisdiction. It is not financial or lending advice.