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The Amortization calculator computes the payments on a loan based on the principal (P), interest rate per period (i), number of periods (t), and the payments per period (n).
INSTRUCTIONS: Choose the preferred curency units and enter the following:
- (P) This is the Principal amount of the loan
- (i) This is the interest rate per period (e.g. 4% per year)
- (t) This is the number of periods (e.g. 30 years)
- (n) This is the number of payments per period (e.g. 12 payments per year, i.e. monthly)
Payment: The calculator returns the payment amount in U.S. dollars. However, this can be automatically converted to other currency units via the pull-down menu.
General Information
Amortization (a.k.a.Monthly Payment) calculates the payment required to pay off a debt with a fixed interest rate over a period of time.
This formula calculates the regular payment required to pay off a debt of a certain amount (P) at a fixed interest rate (r) over a period of time (t) with a number (n) of payments per period.
Usage
This formula is commonly used for home mortgages and other simple debt. It is typically used in a way were the periods (t) are in years, and the number of payments per period (n) is 12 for the number of months.
History
The word AMORTIZATION comes from the Middle English amortisen which means "to kill". In essence, this is the amount needed on a regular basis "to kill" a debt.
See also
- Monthly Payment - Monthly payments including property taxes and insurance.
- Year 1 Interest- Interest paid on a loan or mortgage in the first year.
- Total Payments - Cumulative cost of a loan including principle and interest.
