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Loan Amortization Schedule

Visualize how your loan is paid off over time. See the breakdown of principal vs. interest.

Loan Details

Monthly Payment
$0
Total Interest$0
Total Cost$0

Total Cost Breakdown

Yearly Amortization Schedule

YearInterest PaidPrincipal PaidBalance

What Is Loan Amortization?

Loan amortization is the process of paying off a debt through regular scheduled payments over a fixed period. Each payment covers two components: interest (the cost of borrowing) and principal (the reduction of your outstanding balance). While your monthly payment stays the same throughout the loan, the split between interest and principal shifts dramatically over time.

In the early years of an amortizing loan, the vast majority of each payment goes to interest — because interest is calculated on your full outstanding balance. As you pay down the principal, less interest accrues, and more of each payment chips away at the balance itself. This is why your loan balance seems to move so slowly at first.

The Amortization Formula

M = P × [i(1+i)^n] / [(1+i)^n − 1]
MMonthly payment
PPrincipal (loan amount)
iMonthly interest rate (annual rate ÷ 12)
nTotal payments (years × 12)

Why Early Payments Are Mostly Interest

Consider a $300,000 mortgage at 6.5% for 30 years (monthly payment: ~$1,896):

YearInterest PaidPrincipal PaidBalance Remaining
Year 1$19,388$3,344$296,656
Year 5$18,736$3,996$280,568
Year 10$17,590$5,142$257,058
Year 20$13,724$9,008$187,095
Year 30$6,391$16,341$0

Total interest over 30 years: approximately $382,633 — more than the original loan amount.

How Extra Payments Change Everything

Extra principal payments reduce your balance faster, which means less interest accrues going forward. The impact is dramatic:

StrategyPayoff TimeTotal InterestSavings
Minimum payment only30 years$382,633—
+$100/month extra26 yr 4 mo$319,214$63,419
+$300/month extra22 yr 8 mo$255,488$127,145
One extra payment/year25 yr 8 mo$308,116$74,517

Frequently Asked Questions

Should I get a 15-year or 30-year mortgage?

A 15-year mortgage saves enormous amounts of interest (often $100,000+) and builds equity faster, but requires significantly higher monthly payments. A 30-year offers more monthly flexibility. The right choice depends on payment affordability, income stability, and whether the payment difference would be productively invested.

Does refinancing reset my amortization schedule?

Yes. Refinancing starts a new loan with a new amortization schedule — you restart the cycle of paying mostly interest. This is why refinancing to a lower rate doesn't always save money unless you plan to stay in the home long enough to recoup closing costs and the restarted interest-heavy phase.

What types of loans are amortized?

Most consumer loans: mortgages (15- or 30-year), auto loans, personal loans, student loans. Interest-only loans and balloon loans do not follow standard amortization — they do not reduce principal with each payment in the same way.

What an Amortization Schedule Shows

An amortizing loan is repaid with equal monthly payments. Each payment first covers the interest that built up that month, and the rest reduces the principal. Early in the loan the balance is large, so most of each payment is interest. As the balance falls, the interest portion shrinks and more of every payment goes to principal. The schedule lays out that split for every year of the loan.

Monthly payment = P × r ÷ (1 − (1 + r)^−n)

P = loan amount   r = annual rate ÷ 12   n = number of monthly payments

Worked Example: $300,000 at 6.5% for 30 Years

  • Monthly payment (principal and interest): about $1,896
  • In the first year you pay about $19,400 in interest but only about $3,350 in principal
  • Total interest over 30 years: about $382,600 — more than the amount borrowed

The Power of Extra Payments

Any extra amount you pay goes straight to principal, which reduces the interest charged every month after that. In the example above, paying an extra $200 a month would clear the loan in about 23 years instead of 30 and save roughly $103,000 in interest. Check first that your lender applies extra payments to principal and does not charge a prepayment penalty.

How to Use the Schedule

  • Compare loan terms: a 15-year loan has higher payments but a fraction of the total interest of a 30-year loan.
  • See your equity: the remaining balance each year shows how much of the asset you actually own.
  • Plan refinancing: comparing the remaining balance and rate with current offers shows whether refinancing is worth the closing costs.
  • Budget for tax time: for mortgages, the yearly interest column helps if you itemize deductions.

What Is Not Included

The schedule covers principal and interest only. Mortgage payments often also include property tax, homeowners insurance and mortgage insurance held in escrow. For a full housing payment estimate, use the Mortgage Calculator.

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