Chris Hiszpanski

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Amortization Computer

How do loans work? The idea is pretty simple. You borrow some money from someone, say $1 million. In exchange for the $1 million, you agree to pay back the loan on schedule. But why would anyone give you money just for you to give it back to them over time? They wouldn't. They loan you the money because you agree to pay them interest -- a percentage of how much you owe. So if you borrow $1 million with 3% interest, you need to pay $30,000 per year in interest.

This tool computes a loan amortization table for a fixed-rate loan, such as a mortgage. With such loans, interest accures each month on the outstanding principal -- the higher the outstanding principal, the more is paid in interest each month. Hence, at the beginning of the loan, most of the monthly payment goes towards paying interest. At the end of the loan, most of the monthly payment goes towards paying off principal.

With a higher monthly payment, more is applied towards paying off the principal faster, meaning less interest is paid over the lifetime of the loan.

Loan parameters
$
%
months
$


Amorization Table

MonthMonthly Payment (Principal)Monthly Payment (Interest)Principal Remaining