Amortization Calculator (2024)

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Amortization Calculator (1)

Monthly Pay: $1,687.71

Total of 180 monthly payments$303,788.46
Total interest$103,788.46

Amortization schedule

YearInterestPrincipalEnding Balance

While the Amortization Calculator can serve as a basic tool for most, if not all, amortization calculations, there are other calculators available on this website that are more specifically geared for common amortization calculations.

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What is Amortization?

There are two general definitions of amortization. The first is the systematic repayment of a loan over time. The second is used in the context of business accounting and is the act of spreading the cost of an expensive and long-lived item over many periods. The two are explained in more detail in the sections below.

Paying Off a Loan Over Time

When a borrower takes out a mortgage, car loan, or personal loan, they usually make monthly payments to the lender; these are some of the most common uses of amortization. A part of the payment covers the interest due on the loan, and the remainder of the payment goes toward reducing the principal amount owed. Interest is computed on the current amount owed and thus will become progressively smaller as the principal decreases. It is possible to see this in action on the amortization table.

Credit cards, on the other hand, are generally not amortized. They are an example of revolving debt, where the outstanding balance can be carried month-to-month, and the amount repaid each month can be varied. Please use our Credit Card Calculator for more information or to do calculations involving credit cards, or our Credit Cards Payoff Calculator to schedule a financially feasible way to pay off multiple credit cards. Examples of other loans that aren't amortized include interest-only loans and balloon loans. The former includes an interest-only period of payment, and the latter has a large principal payment at loan maturity.

Amortization Schedule

An amortization schedule (sometimes called an amortization table) is a table detailing each periodic payment on an amortizing loan. Each calculation done by the calculator will also come with an annual and monthly amortization schedule above. Each repayment for an amortized loan will contain both an interest payment and payment towards the principal balance, which varies for each pay period. An amortization schedule helps indicate the specific amount that will be paid towards each, along with the interest and principal paid to date, and the remaining principal balance after each pay period.

Basic amortization schedules do not account for extra payments, but this doesn't mean that borrowers can't pay extra towards their loans. Also, amortization schedules generally do not consider fees. Generally, amortization schedules only work for fixed-rate loans and not adjustable-rate mortgages, variable rate loans, or lines of credit.

Spreading Costs

Certain businesses sometimes purchase expensive items that are used for long periods of time that are classified as investments. Items that are commonly amortized for the purpose of spreading costs include machinery, buildings, and equipment. From an accounting perspective, a sudden purchase of an expensive factory during a quarterly period can skew the financials, so its value is amortized over the expected life of the factory instead. Although it can technically be considered amortizing, this is usually referred to as the depreciation expense of an asset amortized over its expected lifetime. For more information about or to do calculations involving depreciation, please visit the Depreciation Calculator.

Amortization as a way of spreading business costs in accounting generally refers to intangible assets like a patent or copyright. Under Section 197 of U.S. law, the value of these assets can be deducted month-to-month or year-to-year. Just like with any other amortization, payment schedules can be forecasted by a calculated amortization schedule. The following are intangible assets that are often amortized:

  1. Goodwill, which is the reputation of a business regarded as a quantifiable asset
  2. Going-concern value, which is the value of a business as an ongoing entity
  3. The workforce in place (current employees, including their experience, education, and training)
  4. Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers
  5. Patents, copyrights, formulas, processes, designs, patterns, know-hows, formats, or similar items
  6. Customer-based intangibles, including customer bases and relationships with customers
  7. Supplier-based intangibles, including the value of future purchases due to existing relationships with vendors
  8. Licenses, permits, or other rights granted by governmental units or agencies (including issuances and renewals)
  9. Covenants not to compete or non-compete agreements entered relating to acquisitions of interests in trades or businesses
  10. Franchises, trademarks, or trade names
  11. Contracts for the use of or term interests in any items on this list

Some intangible assets, with goodwill being the most common example, that have indefinite useful lives or are "self-created" may not be legally amortized for tax purposes.

According to the IRS under Section 197, some assets are not considered intangibles, including interest in businesses, contracts, land, most computer software, intangible assets not acquired in connection with the acquiring of a business or trade, interest in an existing lease or sublease of a tangible property or existing debt, rights to service residential mortgages (unless it was acquired in connection with the acquisition of a trade or business), or certain transaction costs incurred by parties in which any part of a gain or loss is not recognized.

Amortizing Startup Costs

In the U.S., business startup costs, defined as costs incurred to investigate the potential of creating or acquiring an active business and costs to create an active business, can only be amortized under certain conditions. They must be expenses that are deducted as business expenses if incurred by an existing active business and must be incurred before the active business begins. Examples of these costs include consulting fees, financial analysis of potential acquisitions, advertising expenditures, and payments to employees, all of which must be incurred before the business is deemed active. According to IRS guidelines, initial startup costs must be amortized.

Amortization Calculator (2024)


How do I calculate my amortization? ›

To calculate amortization, first multiply your principal balance by your interest rate. Next, divide that by 12 months to know your interest fee for your current month. Finally, subtract that interest fee from your total monthly payment.

How do you calculate amortization value? ›

There is a mathematical formula to calculate amortization in accounting to add to the projected expenses. Amortization of an intangible asset = (Cost of asset-salvage value)/Number of years the asset can add value.

What is better 25 or 30-year amortization? ›

With a 30-year mortgage, you'll get lower monthly payments and more flexibility than you might with a mortgage that amortizes over 25 years. But you might also pay more for your home overall.

Can I make my own amortization schedule? ›

You can build your own amortization schedule and include an extra payment each year to see how much that will affect the amount of time it takes to pay off the loan and lower the interest charges.

What is the formula for total amortization? ›

Starting in month one, take the total amount of the loan and multiply it by the interest rate on the loan. Then for a loan with monthly repayments, divide the result by 12 to get your monthly interest. Subtract the interest from the total monthly payment, and the remaining amount is what goes toward principal.

How to calculate amortised cost of a loan? ›

Amortised cost model
  1. (1)the amount at which the instrument was initially recognised;
  2. (2)MINUS any repayments of principal;
  3. (3)PLUS or MINUS cumulative amortisation, using the effective interest method, of the difference between the initial recognition amount and the maturity amount, and any fees or transaction costs;

What is amortization with example? ›

The term “amortization” refers to two situations. First, amortization is used in the process of paying off debt through regular principal and interest payments over time. An amortization schedule is used to reduce the current balance on a loan—for example, a mortgage or a car loan—through installment payments.

How to solve amortization problems? ›

Amortization Formula
  1. PMT=P⋅(rm)[1−(1+rm)−mt]
  2. P is the balance in the account at the beginning (the principal, or amount of the loan)
  3. r is the annual interest rate in decimal form.
  4. t is the length of the loan, in years.
  5. m is the number of compounding periods in one year.
May 26, 2022

Is there an Excel formula for amortization? ›

The beginning loan amount changes each month since a portion of the principal balance is being repaid as part of the monthly payment. Alternatively, we can use Excel's IPMT function, which has the following syntax: =IPMT(rate, per, nper, pv, [fv], [type]).

What is the most common amortization method? ›

Broadly speaking, loan amortization only considers the principal and doesn't include interest. These are the most common ways to calculate loan amortization: The French method. Also known as the progressive (quota) method, it consists of paying back the same amount each month until the debt is fully settled.

What is a good amortization period? ›

Amortizing over 30 years lowers your payment to something more manageable. Then you can pay the principal faster (within the limits of your mortgage contract) when you know you have the extra funds. You can always stop the prepayments in the event of a financial emergency.

Can I lower my amortization period? ›

The shorter the amortization period, the less interest you pay over the life of the mortgage. You can reduce your amortization period by increasing your regular payment amount. Your monthly payments are slightly higher, but you'll be mortgage-free sooner.

Does paying extra principal change amortization schedule? ›

Paying a little extra towards your mortgage can go a long way. Making your normal monthly payments will pay down, or amortize, your loan. However, if it fits within your budget, paying extra toward your principal can be a great way to lessen the time it takes to repay your loans and the amount of interest you'll pay.

What is a normal amortization schedule? ›

An amortization schedule, often called an amortization table, spells out exactly what you'll be paying each month for your mortgage. The table will show your monthly payment, how much of it will go toward your loan's principal balance, and how much will be used on interest.

How to calculate amortization expense? ›

Assuming the straight-line method is used, the company divides the capitalized cost by the estimated useful life, and that gives you the amortization expense per year to recognize in the financial statements. Similar to depreciation, amortization is a non-cash expense, so there is no cash flow impact.

What is the formula for the monthly loan payment? ›

Monthly Payment = (P × r) ∕ n

Again, “P” represents your principal amount, and “r” is your APR. However, “n” in this equation is the number of payments you'll make over a year. Now for an example. Let's say you get an interest-only personal loan for $10,000 with an APR of 3.5% and a 60-month repayment term.

How do you calculate the amortization of a car loan? ›

Amortization Schedules

Using the interest rate per payment period (i.e. your yearly interest rate divided by 12 months), multiply this rate by the previous month's balance owed. The principal paid is calculated by subtracting the interest paid from the monthly payment amount.

How do you calculate amortization for tax purposes? ›

Amortization begins later in the month you purchased the intangible asset, or the month your business begins to generate revenue. To figure out your annual amortization expense, you need to divide the original cost of the asset by 15 years. The expense is claimed on Part VI of IRS Form 4562.


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