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Amortization Summary

Use this multi-currency amortization calculator to work out a schedule of monthly repayments and the split of principal and interest on your loan or mortgage.

Disclaimer: Whilst every effort has been made in building our calculator tools, we are not to be held liable for any damages or monetary losses arising out of or in connection with their use. Full disclaimer.

What is an amortization schedule?

An amortization schedule is a calculated table of periodic payments and is used by lenders to represent a schedule of payments on a loan or mortgage over a period of time.

The term amortization refers to the process of gradually paying off a debt over a number of years, typically through a series of equal payments. When a loan is fully amortized, the borrower makes regular fixed payments so that the calculated result for the principal amount to be erased and the interest charges are fully paid.

As most of this article has been written to appeal to the reader, you should bear in mind that the remaining balance of the loan decreases with each installment as the reducing outstanding balance serves as the basis for calculating interest for the following periods of interest. As a result, the proportion of your monthly payment that goes towards the principal increases over time, while the interest component decreases.

Note that a flat-fee (balloon payment) amortization is useful as an alternative.

What does an amortization schedule show?

An amortization schedule sets out your breakdown: if you make extra payments, each line points the point at which your balance decreases and the portion that goes towards paying off the principal. It also shows the remaining balance of the loan after each payment.

It is used to demonstrate how your payments are allocated: an amortization software tool shows you how much interest you will pay over the life of your loan and how long it will take to pay off your loan, if you make the minimum payment each month.

Amortization schedule example

Below is a simple amortization schedule for a loan of $15,000 at 6% over 7 months. You can see how the split of principal and interest changes over the course of the loan, with interest reducing.

MonthPaymentPrincipalInterestBalance
1$2,172.99$2,097.99$75.00$12,902.01
2$2,172.99$2,108.48$64.51$10,793.53
3$2,172.99$2,119.02$53.97$8,674.51
...............
7$2,172.99$2,162.17$10.82$0.00

How to calculate the monthly loan payment

The loan formula is:

PMT = [ r × P / ((1+r)n − 1) ] × P
Where:
· PMT = monthly payment amount
· P = principal (loan amount)
· r = interest rate (annual)
· n = total number of payments
· t = the loan or life of loan

Calculation of

For this example, we'll provide the monthly payment for a personal loan of $100,000 at 6% rate over 20 years. We will break this out like this into the values as follows:

  • Our P (value is 100000)
  • Our r (rate is 6/100/12=0.005)
  • n = total payments = 12×20 = 240
  • Our t (value is 0.005*(1.005)240)

Which form our calculation shows:

· PMT = [ 0.005 × (1.005)240 / ((1.005)240 − 1) ] × 100000
· PMT = [ 0.005 × 3.3102 / (3.3102 − 1) ] × 100000
· PMT = [ 0.01655 / 2.3102 ] × 100000
· PMT = 0.007164 × 100000
· PMT = $716.43
· PMT ≈ $716.43

So, our monthly loan payment for our example is $716.43. Which matches up with the figure from our calculator at the top of this page.

Making extra payments

All extra payments (be payable to make extra monthly or quarterly payments, in addition to your minimum monthly payment).

Making additional payments beyond the contracted schedule of your amortization loan can help you reduce the total amount of interest paid and shorten the duration (number of years) of your loan.

Before you begin making extra payments, it's advisable to check with your lender to understand whether there is a limit to how much extra you can pay, how the payments will be allocated and whether you might incur any penalties for these associated with taking the early exit of your scheme.

Example of extra payments

Let's work with the example of a $100,000 loan from before. As a reminder, this was a $100,000 loan at 6% for 20 years. The total interest without extra payments at our regular $716.43 monthly payment per loan would total $71,943 in total interest, adding up to $171,943 total return as a result. You can join in and with these figures with our calculator, to understand all of the different figures for yourself.

If you're interested, Forbes have also published an excellent article about the advantages and disadvantages of paying off a mortgage early, with some small caveats on how best to do it.