Definition

Loan Amortization

Loan amortization is structured repayment where each installment includes both interest and principal.

Understand payment composition over time and how extra principal impacts total borrowing cost.

Last reviewed: 2026-03-03 | Review cycle: 120 days | Next review due: 2026-07-01

How It Works

Early payments usually allocate more to interest because outstanding principal is highest at the start.

As principal declines, interest share falls and principal share rises.

Extra payments in earlier periods typically generate larger total-interest savings.

Scenario

$300,000 mortgage at fixed rate over 30 years.

Outcome

Initial monthly payments are interest-heavy, then gradually shift to principal-heavy.

Scenario

Borrower adds $200 monthly extra principal from year 1.

Outcome

Loan term shortens and lifetime interest can fall materially.

Loan Amortization Calculator

View monthly payment split, interest cost, and remaining balance over loan term.

Mortgage Payoff Calculator

Model mortgage payoff timeline and total interest with optional extra monthly payments.

Student Loan Repayment Calculator

Model student loan monthly payment, payoff timeline, and interest savings from extra payments.

Loan Payment for $50,000 at 7% Over 10 Years

Model long-horizon loan payments and see how duration drives total interest expense.

Fixed vs Variable Loan Rate: Which Is Better for You?

Compare fixed and variable loan structures across payment certainty and rate-path risk.

Prepay Loan vs Invest: How to Decide with Math and Risk Context

Compare debt prepayment and investing options using rate spreads, risk tolerance, and liquidity constraints.

Why do early payments look mostly interest?

Interest is calculated on the highest outstanding principal at the beginning of the loan.

Do extra payments always reduce interest?

For amortizing loans, extra principal generally reduces both term and total interest.