Loan amortization schedule: how your monthly payment works
A fixed-rate loan is repaid in equal monthly payments, but the split between interest and principal changes every month. An amortization schedule shows that split, month by month.
The monthly payment formula
Payment = P × r ÷ (1 − (1 + r)−n)
where P is the amount borrowed, r the monthly rate (annual rate ÷ 12) and n the number of months.
Example: 15,000 over 5 years at 4.5%. The monthly rate is 0.375% and n = 60. The payment is 279.65 a month, for a total of 16,778.72, which means 1,778.72 of interest.
Reading an amortization schedule
Each month, interest is charged on the balance still owed. The rest of the payment reduces the principal.
| Month | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 1 | 279.65 | 223.40 | 56.25 | 14,776.60 |
| 2 | 279.65 | 224.23 | 55.41 | 14,552.37 |
| 3 | 279.65 | 225.07 | 54.57 | 14,327.30 |
| … | … | … | … | … |
| 60 | 279.65 | ≈ 278.6 | ≈ 1.0 | 0 |
Month 1: 15,000 × 0.375% = 56.25 of interest. The remaining 223.40 reduces the balance. Next month the interest is slightly lower, and so on.
Why early payments are mostly interest
On a long mortgage the effect is strong. For 200,000 over 25 years at 3.5%, the payment is 1,001.25 and total interest reaches 100,374. In the first year, more than half of every payment is interest.
That is also why overpaying early saves the most: it cuts the balance on which all future interest is charged. The loan overpayment calculator shows the saving.
Term and rate: what costs the most
| 200,000 at 3.5% | Payment | Total interest |
|---|---|---|
| 15 years | 1,429.77 | 57,358 |
| 20 years | 1,159.92 | 78,381 |
| 25 years | 1,001.25 | 100,374 |
A longer term lowers the payment but raises the total cost. To compare two offers, use Compare two loan offers, and check the APR, which includes fees.
Get your schedule
The loan calculator shows the full amortization schedule, by month or by year. You can download it for Excel or print it as a PDF.
Frequently asked questions
How is a loan payment calculated?
Payment = P × r ÷ (1 − (1 + r)^−n), with P the principal, r the annual rate divided by 12 and n the number of months. 15,000 over 5 years at 4.5% gives 279.65 a month.
What is an amortization schedule?
A month-by-month table of each payment: how much goes to principal, how much to interest, and the balance left.
Why is interest higher at the start of a loan?
Because it is charged on the remaining balance, which is highest at the start. As the balance falls, so does the interest.
This information is for guidance only and does not replace professional advice.