Amortization Calculator

Uses for an Amortization Calculator

An amortization calculator can be a handy tool for anyone wanting to make calculations related to the payment schedule for a specific loan. To understand how an amortization calculator works and how it can benefit you, you first need to know the major purpose of an amortization calculator.

If you take a very basic approach to the definition, amortization is just the method that you use to pay off your loan. For example, if you borrow $120 and plan to pay that back over one year, you probably won't need a calculator to help you compute the payments at $10 per month - unless you add interest into the equation. Figuring out the monthly payments with interest added in makes the computation much more complicated and this is where the amortization calculator comes in.

You'll find literally dozens of online amortization calculators by conducting a search for the words amortization calculator on your favorite search engine. Typically, the entire amortization calculator consists of six fields that are fairly self-explanatory - it usually includes the option to print the amortization schedule.

The great thing about amortization calculators as a whole is that many will allow you to plug in numbers that you have or numbers that are important, and to calculate any remaining fields. For example, if you know the amount of your loan (principal only), the interest rate and how much you want your payments to be, you can calculate how long it will take to pay off the loan using an amortization calculator. By the same token, you can calculate how much your payments will be if you want to pay that same loan off in a shorter or longer period of time.

The flexibility of an amortization calculator can even help you with some other calculations, such as figuring the length of time it'll take to pay off credit cards or other loans.

Remember that a loan typically consists of two parts - the principal and the interest. If you choose to print an amortization schedule from your amortization calculator, you'll be able to tell how much of your payment each month is being applied to the principal and how much is going to interest. You'll also be able to determine how much principal is left at any given point in time.