How to use the amortization calculator

What this calculator does

It estimates the monthly payment, total payment, and total interest for a loan with a fixed interest rate.

Who should use it

Borrowers, small business owners, and anyone comparing loan offers before signing.

Input definitions

• Loan amount: how much you borrow
• Annual interest rate: the yearly rate expressed as APR
• Loan term: how long you will repay the loan
• Repayment frequency: monthly, biweekly, or weekly payment schedule

Formula

• Monthly rate: annual rate ÷ 12
• Monthly payment: P = L × r ÷ (1 - (1 + r)^-n)
• Total interest: total payment - loan amount

Assumptions

• The loan has a fixed rate for the full term
• Payments follow the selected repayment frequency
• The example uses USD, but the math works for any currency

Quick example

A bakery borrows $10,000 to buy an oven and repays it over 5 years at 8% interest.

Monthly payment is about $203.

Total payment is about $12,166.

Total interest is about $2,166.

How to interpret the result

The monthly payment is the cash flow you need to cover each month. The total interest shows the cost of borrowing on top of principal.

The amortization table shows how the remaining loan balance falls over time as each payment is made.

Common mistakes

• Using a monthly rate when the input expects an annual rate
• Forgetting that a 0% loan should simply divide principal by payments
• Ignoring fees, insurance, or balloon payments if they are part of the real loan