Amortization Calculator Formula & How It Works
Interestₜ = Balanceₜ₋₁ × r | Principalₜ = M − Interestₜ | Balanceₜ = Balanceₜ₋₁ − Principalₜ
- M = Fixed monthly payment
- r = Monthly interest rate
- t = Payment number
- Balance decreases each period as principal is repaid
An amortization schedule breaks every payment into interest and principal portions. In the first payment nearly all money goes to interest; in the final payment almost all is principal. The crossover point (where more principal than interest is paid) typically occurs in the second half of the loan term.