Amortization Calculator

Amortization is the process of spreading out a loan into a series of equal periodic payments. Each payment is divided into two portions: interest (the fee for borrowing the money) and principal (which directly pays down the remaining balance). At the start of the loan, most of the payment goes toward interest. As the principal balance drops, less interest accrues, and a larger portion goes toward principal until the balance is fully paid off.

An amortization schedule is a detailed ledger tracking every single payment over the lifespan of a loan. For each period, it outlines the beginning balance, interest accrued, principal paid, any extra payments, total payment made, and the resulting ending balance.

Making bi-weekly payments means you make a payment every two weeks. Because there are 52 weeks in a year, this results in 26 bi-weekly payments, which is equivalent to 13 full monthly payments instead of the standard 12. This extra payment per year, combined with more frequent compounding, accelerates principal paydown, shortens the term of the loan, and saves significant interest costs.

During a grace period (commonly found on student loans), you are not required to make regular payments. However, interest still accrues based on the periodic interest rate. In standard loans, this accrued interest is capitalized (added to the principal balance) when the grace period ends. The loan is then re-amortized over the remaining term, resulting in a slightly higher periodic payment but offering short-term cash flow flexibility.

Even small extra principal payments yield massive compound savings because they directly reduce the outstanding loan balance. Since future interest is calculated based on this remaining balance, paying down principal faster decreases the amount of interest that accrues. This shortens the time required to pay off the loan and significantly reduces the total interest paid over the life of the loan.