BorrowingLoan Calculator
Mathematical Formula
Balance(t) = Balance(t-1) − PrincipalPaid(t)
- Total interest = Interest portion of payment t = Balance(t-1) × r
- Principal = Principal portion of payment t = PMT − Interest(t)
- Ending Balance = Remaining loan balance at period t
Loan amortization is the process of spreading out a loan into a series of equal periodic payments. Because interest is charged on the remaining unpaid principal, early payments consist predominantly of interest charges. As the principal diminishes over time, a growing proportion of each payment goes directly toward paying off the loan balance.
Understanding amortization allows borrowers to evaluate the true financial impact of extra monthly principal payments, which immediately reduces the compounding interest burden.
Mathematical model verified & deterministicCalculate Loan Amortization