Plot No. 4 · Money & Finance
Loan Amortization Calculator
See how a fixed-rate loan is paid off year by year. Compare how much of each year's payment goes to interest versus principal, and how the balance shrinks over time.
| Year | Principal paid | Interest paid | Balance |
|---|---|---|---|
| 1 | £3,425 | £1,384 | £16,575 |
| 2 | £3,691 | £1,118 | £12,884 |
| 3 | £3,978 | £831 | £8,906 |
| 4 | £4,287 | £523 | £4,619 |
| 5 | £4,619 | £190 | £0 |
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The amortization formula, worked through
A fixed-rate loan is repaid with one level payment, found with the annuity formula M = P x r / (1 - (1 + r)^-n). P is the amount borrowed, r is the monthly interest rate (the annual rate divided by 12) and n is the number of monthly payments. Each month, interest is charged on the balance still owed, and whatever is left of the payment after that interest reduces the balance.
For the default loan of £20,000 at 7.5% over 5 years, r is 7.5% / 12 = 0.00625 and n is 60. The formula gives a payment of £400.76. In month 1 the interest is £20,000 x 0.00625 = £125.00, so £275.76 goes to principal and the balance drops to £19,724.24. Over all 60 payments you repay £24,046, of which £4,046 is interest. The first year of that schedule looks like this:
| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | £400.76 | £125.00 | £275.76 | £19,724.24 |
| 2 | £400.76 | £123.28 | £277.48 | £19,446.76 |
| 3 | £400.76 | £121.54 | £279.22 | £19,167.54 |
| 4 | £400.76 | £119.80 | £280.96 | £18,886.58 |
| 5 | £400.76 | £118.04 | £282.72 | £18,603.86 |
| 6 | £400.76 | £116.27 | £284.48 | £18,319.38 |
| 7 | £400.76 | £114.50 | £286.26 | £18,033.11 |
| 8 | £400.76 | £112.71 | £288.05 | £17,745.06 |
| 9 | £400.76 | £110.91 | £289.85 | £17,455.21 |
| 10 | £400.76 | £109.10 | £291.66 | £17,163.55 |
| 11 | £400.76 | £107.27 | £293.49 | £16,870.06 |
| 12 | £400.76 | £105.44 | £295.32 | £16,574.74 |
Lenders round each payment to the penny and adjust the final one, so a real statement can differ from this table by a few pence.
Monthly payment per £10,000 borrowed
Payments scale in a straight line with the amount borrowed, so this grid works for any loan size: for £25,000, multiply the figure by 2.5. The second line in each cell is the total interest over the term. Notice how stretching the term lowers the monthly payment but raises the interest, often by more than the monthly saving suggests.
| Rate | 1 year | 2 years | 3 years | 5 years | 7 years | 10 years |
|---|---|---|---|---|---|---|
| 3% | £846.94£163 interest | £429.81£315 interest | £290.81£469 interest | £179.69£781 interest | £132.13£1,099 interest | £96.56£1,587 interest |
| 5% | £856.07£273 interest | £438.71£529 interest | £299.71£790 interest | £188.71£1,323 interest | £141.34£1,872 interest | £106.07£2,728 interest |
| 7.5% | £867.57£411 interest | £450.00£800 interest | £311.06£1,198 interest | £200.38£2,023 interest | £153.38£2,884 interest | £118.70£4,244 interest |
| 10% | £879.16£550 interest | £461.45£1,075 interest | £322.67£1,616 interest | £212.47£2,748 interest | £166.01£3,945 interest | £132.15£5,858 interest |
| 15% | £902.58£831 interest | £484.87£1,637 interest | £346.65£2,480 interest | £237.90£4,274 interest | £192.97£6,209 interest | £161.33£9,360 interest |
| 20% | £926.35£1,116 interest | £508.96£2,215 interest | £371.64£3,379 interest | £264.94£5,896 interest | £222.06£8,653 interest | £193.26£13,191 interest |
When principal overtakes interest, and what is left at halfway
The longer the term and the higher the rate, the more of each early payment goes to interest. On a short personal or car loan the principal part is bigger from the first payment. On a long mortgage the balance barely moves for years, which is why you owe well over half the original loan at the halfway point of the term. The table shows the first month in which more of the payment reduces the balance than pays interest, and the balance still owed halfway through.
| Loan | Monthly payment | Interest in month 1 | Principal leads from | Owed at halfway | Total interest |
|---|---|---|---|---|---|
| Personal loan: £10,000 at 9% over 3 years | £318.00 | 24% of the payment | Month 1 | £5,336 (53%) | £1,448 |
| Car loan: £20,000 at 7.5% over 5 years | £400.76 | 31% of the payment | Month 1 | £10,932 (55%) | £4,046 |
| Home improvement loan: £30,000 at 8% over 10 years | £363.98 | 55% of the payment | Month 17 (year 2) | £17,951 (60%) | £13,678 |
| Mortgage: £250,000 at 4.5% over 25 years | £1,389.58 | 67% of the payment | Month 116 (year 10) | £159,197 (64%) | £166,874 |
| Mortgage: £250,000 at 6% over 30 years | £1,498.88 | 83% of the payment | Month 223 (year 19) | £177,622 (71%) | £289,595 |
This is also why an overpayment made early in a loan saves the most: every pound off the balance stops being charged interest for all the months that remain. To see what a loan of this size means for your budget, the mortgage calculator handles home loans and the car loan calculator works from the car price and your deposit, both on the same amortization maths.
How loan amortization works
Amortization is the process of paying off a loan with equal payments over a fixed term. Each payment is split between interest on the remaining balance and a repayment of the principal. This calculator builds the full schedule for any fixed-rate, level-payment loan and groups it into a year-by-year table so you can watch the balance fall.
Early in the loan the balance is large, so most of each payment is eaten by interest and only a little reduces the principal. As the balance shrinks, the interest portion falls and more of every payment chips away at what you owe. That shifting split is the heart of the table this tool produces.
How to use the loan amortization calculator
- Enter the loan amount you are borrowing.
- Set the annual interest rate and the term in years.
- Read the monthly payment and total interest, then scan the table to see principal, interest and balance for each year.
Worked examples
A 20,000 car loan at 7.5 percent over 5 years
Inputs: Loan amount 20,000, rate 7.5 percent, term 5 years.
Result: A monthly payment of about 400.76, total interest of roughly 4,046 and a total repaid of about 24,046. The year-one row shows the highest interest, which then falls every year.
Reading the split over time
Inputs: The same loan, comparing year one with the final year.
Result: In the first year far more of your payments go to interest than principal. By the final year almost the entire payment reduces the balance, which reaches zero.
Limitations and common mistakes
Edge cases and limitations
- Payments and the schedule assume a single fixed rate held for the whole term. Variable-rate loans will drift from this projection.
- Overpayments are not modelled yet, though in reality even small regular overpayments cut total interest and shorten the term.
- Rows are grouped by year and rounded to whole pounds, so the displayed annual figures may differ slightly from a month-by-month statement.
Common mistakes
- Expecting the principal and interest to be split evenly. They are not, and the imbalance is largest at the start.
- Comparing loans on monthly payment alone. The total interest line is the truer measure of cost.
Frequently asked questions
Why does interest dominate the early years?
On a level-payment loan, the monthly payment is fixed but interest is calculated on the remaining balance. Early on the balance is high, so most of the payment goes to interest. As the balance shrinks, more of each payment chips at the principal.
How do overpayments affect this schedule?
Overpayments reduce the principal directly, which means less interest is charged in every subsequent month. Even small regular overpayments can shave years off a loan. This calculator doesn't model them yet but a version will.
Does this work for car loans and personal loans?
Yes. Any fixed-rate, fixed-term, level-payment loan follows the same amortization math: mortgages, car loans and most unsecured personal loans.
What is a loan amortization schedule?
It is a table that lists every payment on a loan and splits each one into interest and principal, with the balance left after it. Payments stay the same, but the interest part falls and the principal part rises each month until the balance reaches zero on the last payment.
How do you calculate a monthly loan payment?
Use M = P x r / (1 - (1 + r)^-n), where P is the amount borrowed, r is the annual rate divided by 12 and n is the number of monthly payments. For 20,000 at 7.5% over 5 years, r is 0.00625 and n is 60, which gives 400.76 a month.
How much interest will I pay on a 10,000 loan over 5 years?
It depends on the rate. At 5% the monthly payment is about 188.71 and total interest about 1,323. At 9% it is about 207.58 a month and 2,455 in interest. At 15% it rises to about 237.90 a month and 4,274 in interest.
When do I start paying more principal than interest?
On short loans, usually from the first payment. On long loans it takes years: a 250,000 mortgage at 4.5% over 25 years only tips towards principal in month 116, nearly 10 years in, and at 6% over 30 years it takes until month 223.
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