How amortization works
An amortizing loan is repaid with equal periodic payments that cover both interest and principal. Early on, most of each payment is interest; over time the balance shrinks, so less interest accrues and more of each payment chips away at principal. The fixed monthly payment comes from the standard formula:
where P is the principal, i is the monthly rate (annual ÷ 12) and n is the number of payments. Each month, interest is i × balance, the rest of the payment reduces the balance, and the cycle repeats until the balance reaches zero.
Worked example
$250,000 at 6.5% over 30 years (360 payments):
Reading the schedule
The table lists every payment with its interest, principal and remaining balance. Watch the crossover point where principal first exceeds interest — it's surprisingly far in on long loans. Adding an extra monthly payment goes entirely to principal, which shortens the term and can save large amounts of total interest; the calculator recomputes the payoff and shows the savings. You can download the full schedule as a CSV to open in any spreadsheet.