Car Loan Amortization Calculator

What is loan amortization

Loan amortization is the process of gradually paying off debt through regular payments, each consisting of two parts: interest (the cost of borrowing) and principal (the actual debt reduction).

Why the payment split changes over time

At the start of a loan, the remaining balance is highest, so the interest charged on that balance is also at its peak — a large share of the monthly payment goes toward interest. As the loan is paid down, the balance shrinks, so interest decreases while the principal portion of the payment grows. This is standard behavior for equal (annuity) payments.

Monthly payment formula

Payment = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate, and n is the number of payments (months).

Why an amortization schedule matters

• Budget planning: know exactly how much to pay each month throughout the loan term.
• Early payoff evaluation: understand how much interest could be saved by paying off the loan sooner.
• Comparing offers: compare total interest paid across different rates or terms from various lenders.
• Tax reporting: in some countries, loan interest may affect tax deductions.

The calculation assumes standard annuity payments (equal amount each month) without additional fees. Actual loan terms may include insurance or other charges — check the full terms with your lender.