Amortisation Calculator

- May 09, 2025
| |

Calculate loan amortisation schedules based on loan amount, interest rate, loan term, and payment frequency. This calculator helps you understand how your payments are applied to principal and interest over time.

Loan Information

£
%
£

Advanced Options

About Loan Amortisation

Loan amortisation is the process of paying off a debt through regular payments over time. Each payment is split between principal and interest, with more interest paid at the beginning of the loan term and more principal paid toward the end.

Understanding Your Payment
  • Principal: The original loan amount you borrow.
  • Interest: The cost of borrowing the money, calculated as a percentage of the principal.
  • Term: The length of time to repay the loan in full.
  • Amortisation Schedule: A table showing the breakdown of each payment, including how much goes to principal and interest.
Benefits of Extra Payments

Making extra payments toward the principal can significantly reduce the total interest paid and shorten the loan term. Even small additional payments can make a big difference over time.

Payment Frequencies
  • Monthly: 12 payments per year (standard for most loans).
  • Bi-Weekly: 26 payments per year (one payment every two weeks).
  • Weekly: 52 payments per year (one payment per week).

Switching from monthly to bi-weekly or weekly payments can save you money by making more frequent principal reductions and potentially making the equivalent of one extra monthly payment per year.

Understanding the Amortization Calculator

The Amortization Calculator is a handy tool designed to help you break down your loan payments. It gives you a clear view of how much you'll pay monthly, the total interest you'll owe, and how your payments affect the loan balance over time. By inputting your loan amount, interest rate, and term, you can easily see how payments are distributed between principal and interest, helping you make informed Financial decisions.

Loan Amount and Interest Rate

When using the calculator, the loan amount and interest rate are the primary inputs. The loan amount represents the total sum you're borrowing, while the interest rate shows what you'll pay for borrowing that money. Here’s why they matter:

  • Higher Loan Amount: Leads to larger monthly payments and more interest paid over time.
  • Interest Rate: Even a small change can significantly impact your total cost of the loan.

Adjusting Loan Term and Payment Frequency

The loan term is how long you have to repay the loan, usually expressed in years or months. Payment frequency describes how often you'll make payments, whether monthly, bi-weekly, or weekly. Both factors affect your payment size and total interest paid. For example:

  • Longer Loan Terms: Result in smaller monthly payments but more interest over time.
  • More Frequent Payments: Can reduce the total interest you pay and help you pay off the loan faster.

Extra Payments and Their Benefits

Another feature of this calculator is the option to input extra payments. Making additional payments toward your loan can drastically cut down the interest you owe and shorten the loan term. Even small extra payments can save you money and time, making your financial journey smoother.

Understanding Your Results

Once you enter all your details, the calculator provides a breakdown of your payments. You'll receive insights on your monthly payment, total principal, total interest paid, and overall loan cost. It makes complex figures simple to understand, enabling you to plan your budget better.

Viewing the Amortization Schedule

The Amortization Calculator allows you to view a full amortization schedule. This schedule details each payment, showing how much goes toward the principal versus interest over the life of the loan. This transparency helps you see how paying off your loan progresses over time.

Calculated Formulas Behind the Scenes

The calculator is based on a simple formula that helps determine your monthly payment. The formula used is:

PMT = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ-1]

The variables represent the principal, interest rate per period, and total number of payments. Understanding this helps demystify how your payments are calculated, making it easier for you to adjust inputs as needed.

Why Use the Amortization Calculator?

Using the Amortization Calculator can simplify your financial planning. It not only helps you understand your loan but also aids in making informed decisions about repayments and extra payments. By clearly seeing how changes affect your total cost, you can effectively manage your finances and strive towards debt-free living.