2026-02-14 • Updated 2026-02-14 • 11 min read
Loan Amortization Schedule Explained: Monthly Payments, Interest, and Extra Payments
A clear guide to loan amortization schedules, how monthly payments are split, and how extra payments reduce interest and payoff time.
By InterestCal Editorial
What Is a Loan Amortization Schedule?
A loan amortization schedule is a month-by-month breakdown of each payment into interest and principal, plus remaining balance after each payment.
Use the Amortization Calculator to generate this schedule instantly for your own loan assumptions.
Why Early Payments Are Interest-Heavy
At the start of a fixed-rate loan, balance is highest, so interest charges are larger. Over time, as balance falls, more of each payment goes to principal.
Understanding this pattern helps borrowers decide whether refinancing or prepayment fits their strategy.
How Extra Payments Change the Schedule
Extra payments usually reduce principal directly, which lowers future interest charges and shortens payoff timeline.
Test this in the Extra Payment Loan Calculator style workflow for mortgages and other installment debt.
Formula Foundation
Standard fixed-payment formula is M = P*r/(1-(1+r)^-n). Each month: interest = prior balance * monthly rate; principal = payment - interest.
The schedule is built iteratively to reflect real month-by-month balance transitions.
When to Prioritize Prepayment
Prepayment can be attractive when loan rate is high, cash flow is stable, and liquidity reserves are already adequate.
For trade-off analysis against investing, read Mortgage Prepayment vs Investing.
Conclusion
A loan amortization schedule makes borrowing cost transparent and helps you evaluate extra payment strategies with precision.
Use amortization and payoff calculators together to choose a debt strategy aligned with your broader financial goals.
Frequently Asked Questions
What does an amortization schedule show?
It shows each payment period’s interest amount, principal amount, and remaining loan balance.
Why do I pay more interest at the beginning of a loan?
Because interest is calculated on the highest outstanding balance in early months.
Do extra payments reduce total interest?
Yes, extra principal payments typically lower lifetime interest and shorten payoff duration.
Can amortization calculators model fixed-rate loans only?
Most basic versions are for fixed-rate loans; variable-rate loans require changing-rate assumptions.
Should I prepay loan or invest surplus cash?
It depends on loan rate, expected investment return, taxes, risk tolerance, and liquidity needs.
