An amortizing loan is repaid in equal payments, but each payment splits differently: early on it is mostly interest, at the end mostly principal. The schedule shows that split for every payment, which is what you need to see how much a loan really costs, what you still owe after any number of years, and what an extra payment does.
How it is calculated
- Monthly payment = P × r ÷ (1 − (1 + r)−n), with P the loan amount, r the monthly rate (APR ÷ 12), n the number of payments.
- Each month: interest = balance × r; principal = payment − interest (+ any extra); new balance = balance − principal.
- Total interest is the sum of the interest column. With extra payments the schedule ends early, and the difference in total interest is the saving.
Example
$300,000 at 6.5% for 30 years: payment $1,896.20. The first payment is $1,625 interest and only $271 principal. Total interest over 30 years is $382,633, more than the amount borrowed. Adding $200 a month pays the loan off in about 23 years and saves roughly $103,000 in interest.
Why extra payments are so effective early
An extra dollar of principal in year one stops interest accruing on it for the remaining 29 years; the same dollar in year 25 saves five years of interest. That is why front-loading extra payments, or a one-off lump sum early in the loan, has an outsized effect. Check that the loan has no prepayment penalty and that extra amounts are applied to principal, not to next month’s payment.
What is not included
Property tax, insurance and HOA fees for a mortgage; these are added to the payment by the lender but do not amortize. Variable-rate loans change the payment when the rate resets; this schedule assumes a fixed rate.
Frequently asked questions
What is amortization?
Paying off a loan in regular equal payments where each payment covers that period’s interest plus some principal. The schedule lists the split for every payment until the balance is zero.
Why is most of my early payment interest?
Because interest is charged on the outstanding balance, which is highest at the start. As the balance falls, the interest part shrinks and the principal part grows, even though the payment stays the same.
How much does an extra $100 a month save?
On a $300,000, 30-year loan at 6.5%, about $61,000 in interest and 4 years off the term. Enter your own figures above; the savings scale with the rate and the remaining term.
Does this work for car loans and personal loans?
Yes. Any fixed-rate loan with equal monthly payments follows the same schedule. Enter the amount, APR and term in years.
Is the payment the same as what the bank charges?
For the principal and interest, yes, to the cent in almost all cases. Mortgages add escrow for taxes and insurance on top; the total may also differ slightly if the lender rounds differently.
Sources
- CFPB: Understanding your loan estimate and amortization
- Federal Reserve: Consumer’s guide to mortgage settlement costs
By Calcelate Team. Formula from the sources above.
- 2026-09-14 · Formula and texts checked