Amortization Calculator

What is amortization?

Amortization means two related things. On a loan, it is the process of paying down a balance over time through a series of fixed payments, each one covering that period’s interest first and putting the remainder against the principal. In business accounting, the same word describes spreading the cost of an expensive, long-lived asset, or certain intangible assets, across the periods it is used, rather than expensing all of it at once.

Worked example. A loan amount of 200,000, a 15-year term (180 months), and a 6% annual rate. The monthly payment on a 200,000 loan over a 15-year term (180 months) at a 6% annual rate is 1,687.71, unchanged for all 180 months. Over the full term that adds up to 303,787.80 paid in total, of which 103,787.80 is interest and the remaining 200,000 is the original amount borrowed. Early payments are mostly interest, since interest is charged on whatever balance remains, and by the final month only 8.40 of the 1,687.71 payment is interest, with the rest paying off the last of the principal.

Paying off a loan over time with the amortization calculator

Mortgages, car loans, personal loans and student loans are all amortized: every payment blends principal and interest, and the interest portion shrinks as the balance shrinks, since it is calculated on what is still owed rather than on what was originally borrowed. A fixed monthly payment on an amortized loan buys more and more principal each month, even though the payment itself never changes.

Credit cards work differently. A card balance is revolving debt, not an amortized loan: there is no fixed schedule and no set number of payments, interest accrues on whatever balance carries over, and the minimum payment is a small percentage of that balance rather than a fixed instalment sized to clear it by a set date. The site’s own credit card calculator works out how long a revolving balance actually takes to clear at a chosen payment. Interest-only loans and balloon loans are two further exceptions: an interest-only loan charges no principal at all during an initial period, and a balloon loan makes small payments throughout its term before one large final payment clears what is left, so neither fully amortizes across its own term the way this calculator’s schedule does.

Two things change how much interest an amortized loan costs in total: the rate and the term. A longer term lowers the monthly payment by spreading the same principal over more payments, but it also means more months during which interest can accrue, so total interest paid is usually higher over a 30-year term than over a 15-year term at the same rate. Extra payments, the feature above the calculator, work in the opposite direction: every extra dollar reduces the principal immediately, which lowers the interest charged in every month afterward, so even a modest recurring extra payment can cut years off a long-term loan.

The amortization schedule, and what it leaves out

The table above, sometimes called an amortization table rather than a schedule, lists every payment across the loan’s life, split into the interest and principal each one covers, alongside the balance still owed after it. Balances fall fastest late in the schedule, since less of each payment is being absorbed by interest by then, the same pattern the worked example above shows between its first and final month. The same underlying loan amortization calculator math applies whether the loan behind it is a mortgage, a personal loan, or the plain loan this page defaults to; a mortgage amortization schedule is only a fixed-rate loan schedule with a larger principal and a longer term.

A basic amortization schedule like this one assumes a fixed rate for the whole term. It does not fit an adjustable-rate mortgage, a variable-rate loan, or a line of credit, since the payment on any of those can change whenever the rate does, which breaks the fixed-payment assumption the whole schedule is built on. By default the schedule also assumes no extra payments and no additional fees; use the extra-payments checkbox above the calculator to see how a monthly, yearly, or one-time extra payment changes the payoff date and the total interest.

The schedule table above can be read as an annual total, one row per year, or expanded to a full monthly breakdown using the toggle at its top. Alongside it, a principal-versus-interest chart shows how much of every payment made so far went to each, and a balance chart plots the loan’s remaining balance from the first payment to the last, the fastest way to see visually how much sooner a schedule with extra payments reaches zero than the standard one.

Amortization schedule types: monthly, annual and special loans

The calculator builds a monthly amortization schedule, one row per payment, and its balance chart rolls the same rows up into years. An annual amortization schedule carries identical totals in 30 rows instead of 360, which is easier to scan on a long loan. What changes from loan to loan is the shape. A 30 year mortgage amortization schedule spends its early years mostly on interest, a 15 year mortgage amortization schedule trades a higher payment for far less total interest, and a car loan amortization schedule is short enough that the balance falls quickly from the start.

Some loans break the standard pattern. An interest only amortization schedule keeps the balance flat until the interest-only period ends, a balloon payment amortization calculator sizes the payments for a long term and then leaves a lump sum due at the end, and a bi-weekly amortization calculator accounts for 26 half-payments a year, which equals 13 full monthly payments. Negative amortization is the odd case where the payment is smaller than the month's interest, so the balance grows instead of shrinking.

Spreading costs: depreciation and intangible assets

The accounting sense of amortization covers two different kinds of asset. Physical assets like machinery, vehicles and buildings are spread over their useful life as depreciation instead; the site’s own depreciation calculator works out a straight-line or declining-balance schedule for exactly that.

Intangible assets follow a separate set of rules under Section 197 of the US tax code, which lists what can be amortized this way: goodwill, going-concern value, workforce in place, business books and records or operating systems, patents, copyrights, formulas, processes, designs and know-how, customer-based and supplier-based intangibles, government-issued licenses and permits, covenants not to compete, and franchises, trademarks and trade names, along with contracts for the use of any of the above. Not everything intangible qualifies: some indefinite-life or self-created intangibles, goodwill in particular, may not be legally amortizable for tax purposes, and Section 197 specifically excludes interests in businesses, contracts or land, most computer software, intangibles not acquired as part of a business, existing lease or sublease interests, residential mortgage servicing rights unless acquired with a business, and certain transaction costs.

Amortizing startup costs

Costs a US business incurs while investigating or creating an active trade or business, before that business actually opens, are startup costs, and they can only be deducted and amortized under specific conditions. The cost has to be incurred before the business becomes active: consulting fees, financial analysis of a potential acquisition, advertising run before opening, and wages paid to employees before the business starts operating are common examples. The IRS requires these initial startup costs to be amortized rather than deducted in a single year, spreading their tax effect across the same kind of schedule this calculator builds for a loan, just applied to a cost instead of a debt. Under Section 195, a business can typically deduct up to 5,000 of startup costs in its first year, a limit that phases out once total costs exceed 50,000, with whatever is not deducted immediately amortized over 180 months (15 years) instead. Confirm the current thresholds before filing, since figures like these are periodically adjusted.