Amortization Calculator with Extra Payments
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Use this multi-currency amortization calculator to work out your schedule of monthly repayments and the split of principal and interest on your loan or mortgage.
Disclaimer: Whilst every effort has been made in building our calculator tools, we are not to be held liable for any damages or monetary losses arising out of or in connection with their use. Full disclaimer.
What is an amortization schedule?
An amortization schedule is a calculated table of periodic payments and is used by lenders to represent a schedule of repayments on a loan or mortgage over a period of time.
The term 'amortization' refers to the process of gradually paying off a debt over a period of time, typically through a series of equal payments. When a loan or a debt is amortized, the borrower makes regular fixed payments that are allocated towards both the principal amount borrowed and the interest charged on that amount.
As more of the principal loan balance is repaid over time, less interest becomes due on the remaining principal balance. Due to the nature of amortization and the compounding of interest, the interest owed is recalculated on the decreasing principal balance, which results in a gradual reduction of the interest portion of each payment. Hence, over time, the split of interest versus principal changes, with interest reducing and more of the principal being paid off.
Note that in British English, amortization is spelled as 'amortisation'.
What does an amortization schedule show?
An amortization schedule shows you a breakdown of your periodic loan payments, split into the portion that goes towards interest and the portion that goes towards paying off the principal. It also shows you the remaining balance of the loan after each payment.
As well as demonstrating how your payments are allocated, an amortization schedule also shows you how much interest you will pay over the life of your loan and how long it will take to pay off your loan if you make the required payments.
Amortization schedule example
Below is an example amortization schedule for a loan of $3,000 at 5% over 11 months. You can see how the split of principal and interest changes over the course of the loan, with interest reducing.
| Payment date | Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| Jan 2021 | - | - | - | $3,000.00 |
| Feb 2021 | $279.59 | $267.09 | $12.50 | $2,732.91 |
| Mar 2021 | $279.59 | $268.21 | $11.39 | $2,464.70 |
| Apr 2021 | $279.59 | $269.32 | $10.27 | $2,195.38 |
| May 2021 | $279.59 | $270.45 | $9.15 | $1,924.93 |
| Jun 2021 | $279.59 | $271.57 | $8.02 | $1,653.36 |
| Jul 2021 | $279.59 | $272.70 | $6.89 | $1,380.66 |
| Aug 2021 | $279.59 | $273.84 | $5.75 | $1,106.82 |
| Sep 2021 | $279.59 | $274.98 | $4.61 | $831.84 |
| Oct 2021 | $279.59 | $276.13 | $3.47 | $555.71 |
| Nov 2021 | $279.59 | $277.28 | $2.32 | $278.43 |
| Dec 2021 | $279.59 | $278.43 | $1.16 | $0.00 |
How to calculate the monthly loan payment
The monthly loan payment can be calculated using a mathematical formula that takes into account the interest rate, the term of the loan, and the principal amount borrowed.
The basic formula looks like this:
PMT = [ r + r / ((1+r)^t -1) ] x P
Where:
- PMT = monthly payment amount
- r = annual interest rate (decimal) / 12
- P = principal loan amount
- t = time in months
- ^ = ... to the power of ...
Calculation example
For this example, we'll calculate the monthly payment on a personal loan of £100,000 at 6% interest for 20 years. We add these into our formula as follows:
- Our P value is 100000
- Our 'r' value is 0.005 (6/100/12)
- Our t value is 240 (20×12)
Here's how our calculation looks:
- PMT = [ 0.005 + 0.005 / (1.005 ^ 240 - 1)] × 100000
- PMT = [ 0.005 + 0.005 / (3.3102044758 - 1)] × 100000
- PMT = [ 0.005 + 0.005 / 2.3102044758] × 100000
- PMT = [ 0.005 + 0.002164310585] × 100000
- PMT = 0.007164310585 × 100000
- PMT = £716.43
So, our monthly loan payment for our example is £716.43, which matches up with the figure from our calculator at the top of the page.
Making extra payments
With some types of loan, it's possible to make extra monthly or quarterly payments, in addition to your minimum monthly payment.
Making additional payments towards the principal balance of your amortizing loan can help you reduce the total amount of interest paid and shorten the repayment period on your loan.
Before you begin making overpayments, it's advisable to check with your lender to understand whether there is a limit to how much extra you can pay, how the payments will be allocated and whether you might incur any penalties or fees associated with paying the loan off sooner. 1
Example of extra payments
Let's look back at the example of our £100,000 loan from above. As a reminder this was a £100,000 loan at 6% for 20 years. If we add an extra £100 payment on top of our regular £716.43 monthly payment, our loan could be paid off 49 months sooner, saving us £16,788 in total interest as a result. You can play around with these figures with our calculator, to understand what might be possible.
If you're interested, Forbes.com has published an excellent article about the advantages and disadvantages of paying off a mortgage early, with some ideas on how best to do it.
To conclude
I hope you've found our amortization schedule calculator useful. If you have any questions or suggestions for improvements, please get in contact.
Calculator by Alastair Hazell. Reviewed by Chris Hindle.References
- Money Supermarket. Should I overpay on my mortgage?