Loan Amortization Calculator: Complete Guide
Understanding how loan amortization works is fundamental to making smart financial decisions. Our free calculator helps you compare different amortization systems and plan your payments effectively.
What is Loan Amortization?
Amortization is the process of gradually paying off a debt through periodic payments. Each monthly payment is divided into two parts: one portion covers the loan interest, and the other reduces the outstanding principal. Understanding this process allows you to visualize how your debt will behave over time and better plan your personal finances.
Amortization Systems: French vs German vs American
There are three main amortization systems, each with unique characteristics:
French System (Constant Payment)
The most common in Europe and the US. You pay the same monthly installment throughout the loan term. Initially, you pay more interest and less principal, but the payment remains constant. It's ideal if you seek stability and predictability in your monthly payments.
German System (Constant Principal)
In this system, principal amortization is constant each month. Payments are higher at the beginning and gradually decrease. You pay less total interest than with the French system, but it requires greater initial payment capacity.
American System (Interest Only)
During the loan term, you only pay interest. The entire principal is returned at the end in a single payment. It's uncommon for personal loans but used in some commercial mortgages and short-term loans.
How to Use Our Loan Calculator?
Our tool is very easy to use: enter the loan amount, annual interest rate, term in months, and select the amortization system. You'll instantly get your monthly payment, total interest to pay, and a detailed month-by-month amortization table. Plus, you can export results to PDF or CSV to share with your financial advisor or bank.
Tips to Save on Your Loan
An effective strategy to reduce the total cost of your loan is to make early repayments. Our 'Smart Scenarios' module allows you to simulate extra monthly payments and see how much you'd save in interest and how many months you'd reduce the term. Even small additional payments can generate significant long-term savings.
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