Personal Finance · 5 min read
How to Read an Amortization Schedule
Each row splits one payment into interest, principal, and a new balance
An amortization schedule lists every period of a fixed installment loan: interest on the current balance, principal from the rest of the payment, and the balance that remains. This tutorial walks through how to read those columns, a $20,000 / 6.5% / 5-year monthly worked example, and a playground that shows first-year principal versus interest with an extra-payment toggle. Figures are illustrative; fees and taxes are omitted.
Written by the My Calculator Stack editorial team. About our methods
These figures are illustrative. Origination fees, insurance, and taxes are omitted. This is not lending, tax, or financial advice.
1.What a schedule shows
Each row is one payment date. Interest is charged on the remaining balance. The rest of the fixed installment reduces principal. The new balance is old balance minus that principal. Early rows are mostly interest; later rows are mostly principal. The payment itself stays level when the rate and schedule are fixed. Origination fees, insurance, and taxes are not in these rows.
2.The formulas
The installment uses the same annuity formula as the loan calculator: p = P · i(1+i)^N / ((1+i)^N − 1), with period rate i = annual rate / m and N = years × m. For each row, interest = balance × i, principal = p − interest, and the next balance is balance − principal. An extra principal payment increases the principal column that period and lowers every later interest charge. Monthly loans use m = 12.
\[ \begin{aligned}p &= P\frac{i(1+i)^{N}}{(1+i)^{N}-1} \\\text{interest} &= B\cdot i,\quad \text{principal}=p-\text{interest}\end{aligned} \]
3.Worked example
Take a $20,000 loan at 6.5% annual for 5 years with monthly payments — the same defaults as the amortization calculator. Period rate i = 0.065/12, N = 60, and p ≈ $391.32. The first payment is about $108.33 interest and $282.99 principal, leaving a balance near $19,717. Over the first twelve rows, about $3,499 goes to principal and $1,197 to interest. Adding $50 extra each month raises first-year principal to about $4,117 and trims first-year interest to about $1,179 — more of year one pays down the loan.
\[ p = 20000\frac{i(1+i)^{60}}{(1+i)^{60}-1}\approx 391.32 \]
4.First-year principal versus interest
Toggle an extra monthly principal payment and move term and rate to see the first twelve months’ mix of principal versus interest. This is a teaching widget — a first-year stack, not a 360-row table clone, no escrow, no extra fees, no full calculator chrome. Open the amortization calculator when you want the period-by-period schedule and CSV.
Inline playground
First twelve months · fees and taxes omitted
Scheduled payment per month
$391.32 + $50 extra
First year: principal $3,498.89 · interest $1,196.98
i = 0.065/12, N = 60 → p ≈ 391.32
Illustrative only — first-year totals, not a period-by-period schedule. Extra principal is a flat $50 per month when enabled.
Open the full amortization calculator →5.Open the full calculator
The amortization calculator uses the same payment formula, the same $20,000 / 6.5% / 5-year monthly example, and the same limitation that fees and taxes are omitted. Browse other personal finance tools if you need a loan payment, a mortgage, or compound interest next.
Try it yourself
Open the related calculator and put these formulas to work.