A finance charge expressed as an annual rate.
Calculations may be saved as web bookmarks.
Payment Schedule
| # | month | year | payment | total paid | cumulative interest | balance |
| 1 | Feb | 2011 | $ 1,998.83 | $ 1,998.83 | $ 583.33 | $ 98,584.51 |
| 2 | Mar | 2011 | $ 998.83 | $ 2,997.66 | $ 1,158.41 | $ 98,160.75 |
| 3 | Apr | 2011 | $ 998.83 | $ 3,996.48 | $ 1,731.01 | $ 97,734.53 |
| 4 | May | 2011 | $ 998.83 | $ 4,995.31 | $ 2,301.13 | $ 97,305.82 |
| 5 | Jun | 2011 | $ 998.83 | $ 5,994.14 | $ 2,868.75 | $ 96,874.61 |
| 6 | Jul | 2011 | $ 998.83 | $ 6,992.97 | $ 3,433.85 | $ 96,440.88 |
faq
Annual Percentage Rate
Annuity
The term annuity is used in finance theory to refer to any terminating stream of fixed payments over a specified period of time.
Closing Costs
Fees due at the end of a loan to close the contract.
Compound Interest
The sum of all interest payments made on a loan over a certain time period.
Early Payment
The closer an early payment is to the beginning of the loan, the greater reduction it will have on the total cost.
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How does it work?
The loan amortization calculator uses an annuity formula to show monthly payments, and compare loan interest with different durations and APR.
Amortization Definition
Amortization refers to scheduled payments made towards paying back a loan. Each incremental payment includes a portion of the loan amount, plus an amount of interest.
Compount Interest
When loan payments are calculated, it is not as straight forward as (APR X principle X years). That way would cost much less, the actual formula includes compound interest. This is basically the principle X APR + principle, for the first year, and then repeat for every year of the loan.
The net effect is that each successive year calculates interest including a percentage of the previous year (APR X principle). The payments each month don't actually reduce the amount of the loan in the respect of how the interest is calculated.
Tip: Use Shorter Durations
These combination of factors can lead the interest to erupt quickly, in ways that are not intuitive to the borrower. The longer the duration, the larger and more quickly interest grows. It is not a one to one ratio due to the compounding interest, so a lower time frame for repayment will reduce costs in the long run.
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