Loan Calculator: Amortization Schedule, Payment, and Total Cost

An amortizing loan — the most common form of mortgage or personal credit — is repaid through installments that each combine an interest portion and a principal portion. Understanding how these two portions shift over time helps you read a loan offer correctly, judge the value of an extra repayment, and compare two offers beyond the headline rate. This calculator works in the currency of your choice; the worked examples below use plain amounts (200,000, 300, and so on) that apply regardless of which currency you pick in the selector.

How amortization actually works

A fixed-payment loan (interest-only "bullet" loans aside) follows one simple rule: the total payment never changes from month to month, but its composition does. Each month, the lender computes interest on the balance still outstanding at that point, at the agreed monthly rate. The rest of the payment repays principal. Since the outstanding balance shrinks with every payment, next month's interest shrinks too — and the principal portion grows to match, since the payment itself stays fixed.

That's why the earliest installments of a 20- or 25-year loan repay very little principal: most of the payment goes to interest. It's only years in that the balance tips the other way.

The monthly payment formula

The monthly payment M of a fixed-rate, fixed-payment loan is:

M = C x r x (1 + r)^n / ((1 + r)^n - 1)

where C is the principal borrowed, r the monthly interest rate (the annual rate divided by 12), and n the total number of payments. Special case: at a 0% rate the formula above is undefined (division by zero), so the payment is simply the principal divided by the number of months.

This calculator applies that formula with exact amounts (no floating- point rounding), then rebuilds the schedule row by row: every month, interest is recalculated on the actual remaining balance, not estimated in bulk. The very last installment is adjusted to pay off the remaining balance exactly, down to the finest unit the chosen currency allows (a cent for most currencies, a whole unit for some like the CFA franc or the yen).

A detailed worked example

Take a loan of 200,000 over 240 months (20 years) at an annual rate of 3.5% (the amounts below are expressed in whichever currency you've selected). The corresponding monthly rate is 3.5% / 12, roughly 0.2917%.

The computed monthly payment is 1,159.92, constant across the whole term. Here's how the very first installment breaks down:

• Interest for month 1: 200,000 x 0.2917% = 583.33
• Principal repaid in month 1: 1,159.92 - 583.33 = 576.59
• Remaining balance after month 1: 200,000 - 576.59 = 199,423.41

Conversely, on the final installment (month 240), the remaining balance is small: interest is down to just 3.37, and 1,156.41 of the payment repays the last of the principal, bringing the balance to exactly zero.

Across the whole loan, total interest paid reaches 78,380.66. The total cost of credit — cumulative payments, excluding insurance and origination fees — comes to 278,380.66 on a 200,000 loan: interest accounts for a little over a third of the amount borrowed here.

Why extra repayments matter

Adding an extra monthly repayment speeds up debt payoff without changing the base payment: that extra amount directly reduces the remaining balance, month after month, which shortens the loan's overall term.

Take the previous example (200,000 at 3.5% over 240 months) and add 300 of extra repayment every month. The loan is paid off in 176 months instead of 240 — 64 months saved, over five years. Total interest drops to 55,700.61 instead of 78,380.66, a saving of 22,680.05.

This effect is strongest the earlier the extra repayment starts: early in the loan, the remaining balance — and the interest it generates each month — is at its peak. Repaying an extra 300 in month one of a 240-month loan "saves" far more future interest than repaying the same amount in month 200, when there's barely any principal left to finance.

Reading an amortization schedule month by month

The full amortization schedule this calculator produces — row by row — carries five pieces of information for each installment: the payment made, the interest portion, the principal portion, any extra repayment, and the remaining balance afterward. On the 200,000 at 3.5% over 240 months example, here's how things shift between the start and the midpoint of the loan:

• Month 1: interest 583.33 / principal 576.59 (49.7% of the payment goes to interest)
• Month 120 (10 years, the midpoint): interest 344.50 / principal 815.42; the remaining balance is down to 117,298.78, even though half the payments are still ahead
• Month 240 (final installment): interest 3.37 / principal 1,156.41 (99.7% of the payment goes to principal)

This gradual shift explains why selling a property or refinancing a loan early in its life leaves relatively little principal repaid despite years of payments: most of the money paid in the early years goes toward interest, not toward owning more of the asset outright.

The rate used in this example is fixed: it doesn't change over the loan's life, unlike a variable rate, which tracks a reference index and can push the payment (or the term) up or down. This calculator only models fixed-rate loans, a very common form of mortgage for individual borrowers; for a variable rate, you'd need to recompute a fresh schedule at every rate reset, starting from the balance outstanding at that point as the new principal.

Total cost versus monthly payment: don't compare the wrong number

Two loan offers can show a very similar monthly payment while having a radically different total cost. A longer term mechanically lowers the payment (the principal is spread over more installments) but generates more cumulative interest, since the outstanding balance stays high for longer. Conversely, a shorter term raises the payment but lowers the total cost.

That's why this calculator always shows three distinct figures — the monthly payment, total interest, and total cost — and offers a comparison mode to put two offers side by side, with the exact difference on each of these three indicators rather than just a rate percentage.

Common mistakes to avoid

Comparing two loans on the nominal rate alone. In many countries, an annual percentage rate (or local equivalent) that folds in origination fees and often insurance is the legal comparison benchmark — the nominal rate alone isn't enough.

Forgetting borrower's insurance when estimating the real cost. It doesn't repay principal, so it doesn't show up in the amortization schedule itself, but it adds fully to the total cost of credit — and can add up to a substantial sum over 20 years depending on the borrower's profile.

Underestimating the effect of a longer term. Stretching a loan from 15 to 25 years can cut the payment by 30% or more, while nearly doubling the total interest paid over the loan's life.

Ignoring when an extra repayment is made. As shown above, 300 repaid early in a 20-year loan saves far more interest than the same amount repaid near the end: for the same amount, earlier is always better.

Confusing choosing a currency with converting a currency. Selecting a different currency in this calculator never converts any amount: it only changes the displayed unit and rounding (see the dedicated FAQ question below).