Loan Amortization Schedule Generator

Understanding Loan Amortization Schedules

A loan amortization schedule is a complete table of periodic loan payments showing the amount of principal and interest that comprise each payment until the loan is paid off at the end of its term. Each periodic payment is the same total amount, but the proportion that goes toward interest versus principal changes over time. Early payments are mostly interest, while payments toward the end of the loan are mostly principal.

The Amortization Formula

The fixed monthly payment for an amortizing loan is calculated using: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ - 1], where M is the monthly payment, P is the loan principal, r is the monthly interest rate (annual rate divided by 12), and n is the total number of payments.

For each payment, the interest portion is calculated as the remaining balance multiplied by the monthly interest rate. The principal portion is the difference between the fixed payment and the interest portion. This is why more of your payment goes toward principal as the loan matures: the balance is lower, so the interest charge is smaller.

How Extra Payments Save You Money

Making extra payments directly reduces your principal balance. Since interest is calculated on the remaining balance each month, every extra dollar you pay reduces the interest charged on all future payments. The effect compounds over time, and the earlier you start making extra payments, the greater the savings. Consider these examples on a $300,000 mortgage at 7% for 30 years:

• $100 extra/month: Saves approximately $76,000 in interest and pays off the loan about 5 years early.
• $250 extra/month: Saves approximately $137,000 in interest and pays off the loan about 10 years early.
• $500 extra/month: Saves approximately $192,000 in interest and pays off the loan about 14 years early.

Mortgage Payoff Strategies

1. Bi-weekly payments: Instead of 12 monthly payments, make 26 bi-weekly half-payments. This adds one extra full payment per year, shaving years off a 30-year mortgage.
2. Round up your payment: If your payment is $1,847, round up to $1,900 or $2,000. The difference goes straight to principal reduction.
3. Apply windfalls: Use tax refunds, bonuses, or other unexpected income to make lump-sum principal payments for maximum impact.
4. Refinance strategically: If rates drop 1% or more below your current rate, refinancing can save thousands in interest, but always factor in closing costs and how long you plan to stay in the home.
5. Recast your mortgage: After making a large principal payment, some lenders allow you to recast (re-amortize) your loan, which lowers your monthly payment while keeping the same rate and term.

Types of Amortizing Loans

This calculator works for any fixed-rate amortizing loan, including conventional mortgages, auto loans, personal loans, and student loans. It does not apply to interest-only loans, adjustable-rate mortgages (during their variable period), or revolving credit like credit cards. For adjustable-rate mortgages, the amortization schedule would need to be recalculated each time the rate adjusts.