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You enter the loan amount, annual interest rate, term in years, and an optional extra monthly payment. The tool applies the standard fully-amortizing PMT formula with monthly compounding to determine the base payment, then simulates month-by-month payoff — applying each extra payment directly to principal. It assumes a fixed rate, no fees, no escrow, and no prepayment penalties.
Extra payments go directly to principal, shrinking the balance faster. Since interest is calculated on the remaining balance each month, a smaller balance means less interest accrues. Even modest extra payments can cut years off a loan and save thousands in interest.
An amortizing loan has a fixed payment split between principal and interest, with the interest share declining over time. Simple interest charges interest only on the original principal. Most mortgages and auto loans use amortization.
Interest is calculated on the outstanding balance. When the balance is high (early in the loan), the interest portion is large. As you pay down principal, more of each payment shifts to principal reduction — this crossover typically happens past the midpoint of the term.
No. This calculator shows principal and interest only. Mortgage escrow typically adds property taxes, homeowners insurance, and PMI (if applicable) to your actual monthly payment from the lender.
Yes — the amortization formula is the same for any fixed-rate installment loan. Enter the loan amount, rate, and term for any loan type to see the payment schedule and interest breakdown.
Estimate only. Results reflect your inputs and standard formulas — they are not financial, tax, legal, health, or investment advice. Verify important decisions with a qualified professional.