How This Calculator Works
Enter a loan amount, interest rate, term, and start date to get the standard fixed monthly payment and full schedule. Check "Add extra payments" to layer in a recurring extra monthly amount, a recurring extra yearly amount, and up to three one-time extra payments on specific dates — the calculator simulates the loan month by month with those payments applied directly to principal, and shows exactly how much sooner the loan is paid off and how much interest that saves compared to the original schedule.
The Amortization Formula
The fixed monthly payment on a standard amortized loan comes from a single formula:
Where P is the loan amount, r is the monthly interest rate (the annual rate divided by 12), and n is the total number of monthly payments. That payment amount never changes over the life of the loan, but the mix of what it covers does: each month, interest is calculated on the current balance, and whatever's left over from the payment reduces principal. As the balance shrinks, so does the interest charge, which means more of each subsequent payment goes toward principal — a self-reinforcing pattern that's slow to notice in year one and obvious by the final year.
What Extra Payments Actually Do
An extra payment applied to principal doesn't just reduce the balance by that amount once — it removes that amount from the balance that interest gets calculated on for every remaining month of the loan. That's why extra payments made earlier in a loan save more than the identical amount paid later: a $5,000 extra payment in year 2 of a 30-year mortgage prevents 28 more years of interest accruing on that $5,000, while the same payment in year 25 only prevents 5 years of it. This calculator's "Extra Payments Save You" box quantifies that effect directly for your own numbers — the time and interest saved usually looks disproportionately large compared to the extra payments themselves, and that disproportion is the entire point.
Loan Amortization vs. Amortization in Accounting
This calculator handles the first and more common meaning of amortization — paying down a loan through scheduled payments. But the word has a second, unrelated meaning in business accounting: spreading the cost of an intangible asset, such as a patent, a customer list, or acquired goodwill, across its useful life for tax and reporting purposes. Under U.S. tax law (Section 197), specific categories of intangible assets qualify for this treatment, with their own rules for what counts and how the deduction is scheduled. It's a completely different calculation from a loan schedule — this tool is built for the loan-repayment meaning, not the accounting one.
What Doesn't Get Amortized
Not every kind of debt follows a fixed amortization schedule. Credit cards are revolving debt — the balance and minimum payment shift month to month depending on what's charged and paid, with no fixed end date built in. Interest-only loans postpone all principal repayment for an initial period, so the balance doesn't move during that stretch. Balloon loans make small payments for most of the term and then require a large lump-sum payment at the end. None of these fit the steady, predictable principal-and-interest split this calculator assumes, so this tool isn't the right fit for modeling them.
Common Amortization Mistakes
The most common mistake is assuming an extra payment automatically goes toward principal — many loan servicers apply an overpayment toward next month's due date by default unless the payment is specifically marked for principal reduction, which erases most of the acceleration benefit. A second is not accounting for a lender's exact day-count convention or payment posting date, which can shift the schedule by small amounts versus what any calculator projects. A third is treating a 15-year loan's much higher payment as automatically unaffordable without checking the actual interest saved — for many borrowers who can comfortably handle the higher payment, the total interest savings are substantial enough to be worth serious consideration alongside a 30-year term.
Frequently Asked Questions
What's the difference between this and the Loan Calculator?
The Loan Calculator gives you the headline numbers for a fixed-payment, deferred, or bond scenario. This tool is built specifically around modeling extra payments against a standard amortized loan and showing the full schedule, month by month, so you can see exactly how much sooner you'd be debt-free and how much interest that saves.
How do extra payments actually save money?
Every extra dollar applied to principal stops accruing interest for the rest of the loan, not just for one month — pay down principal a year early and you skip an entire year of interest on that amount. That compounding effect is why even modest, consistent extra payments can cut years off a loan and save far more in interest than the extra payments themselves add up to.
Should I make extra payments monthly, yearly, or as one-time lump sums?
Consistency matters more than the specific schedule. A smaller extra amount every month compounds the earliest and typically saves the most interest per dollar committed; a once-a-year lump sum, like a bonus or tax refund, is easier for many people to budget; one-time payments work well for a specific windfall. Try a few combinations in this calculator to see which fits your situation.
Does my lender need to know about extra payments?
Usually yes, and it matters how the payment is applied. Confirm with your lender that extra payments go directly to principal — not held as a credit toward next month's payment or applied to future interest first — otherwise you won't get the acceleration this calculator projects. Also check for prepayment penalties, though these are uncommon on most modern consumer loans.
Why does the principal portion of each payment grow over time?
Interest is charged on the remaining balance, which shrinks every month. Since the scheduled payment stays fixed, whatever isn't consumed by interest goes to principal — as the balance falls, interest's share of the payment falls too, so principal's share rises. Early payments are interest-heavy; late payments are principal-heavy.
What's the difference between amortization for a loan and amortization in accounting?
Both describe spreading something over time, but they apply to different things. Paying down a loan in scheduled installments — what this calculator does — is loan amortization. Businesses also use the term for spreading the cost of an intangible asset, like a patent or acquired customer list, across its useful life for accounting purposes, which is a completely different calculation with its own tax rules.
Are all loans amortized?
No. Revolving debt like credit cards isn't amortized — the balance and required payment can change month to month rather than following a fixed schedule. Interest-only loans and balloon loans also aren't fully amortized, since they don't steadily reduce the principal the way this calculator assumes.
Can I see what happens partway through the loan, not just the start?
Yes — switch to the monthly schedule view and scroll to any point, or check the annual summary for a specific year. It's useful for checking your balance at a specific future date, for example before a planned refinance, sale, or extra-payment decision.
This calculator provides estimates for general informational purposes only and is not financial advice. Your actual lender's schedule may differ based on exact payment posting dates, day-count conventions, and how extra payments are applied — confirm details directly with your loan servicer.