Amortization Calculator

Understanding Amortization

Amortization refers to the process of paying off a debt (often from a loan or mortgage) over time through regular payments. A portion of each payment is for interest while the remaining amount is applied towards the principal balance.

How the Schedule Works

The amortization schedule provides a complete breakdown of every payment. Key components include:

• Payment (EMI): The total fixed amount paid each month.
• Principal Component: The part of the payment that reduces the loan balance. This increases over time.
• Interest Component: The part of the payment that covers interest charges. This decreases over time as the principal balance drops.
• Balance: The remaining loan amount after the payment is made.

Principal vs. Interest

In the early years of a long-term loan (like a 30-year mortgage), the majority of your payment goes toward interest. It is often not until the later years that the majority of your payment starts going toward the principal. Using this calculator helps you visualize exactly when you "turn the corner."

Impact of Extra Payments

Making extra principal payments can dramatically shorten your loan term and save you interest. Since interest is calculated on the remaining balance, reducing that balance faster means less interest accrues in subsequent months.