1. What is the Amortization Formula?

The amortization formula calculates the remaining balance on a loan after a certain number of payments have been made. It takes into account the principal amount, interest rate, total loan term, and number of payments made.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( B \) — Remaining balance
• \( P \) — Original principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in months)
• \( p \) — Number of payments already made

Explanation: The formula calculates how much principal remains after a certain number of payments by accounting for both principal and interest portions of each payment.

3. Importance of Remaining Balance Calculation

Details: Knowing your remaining balance helps with financial planning, refinancing decisions, and understanding how much equity you've built in an asset.

4. Using the Calculator

Tips: Enter principal in dollars, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), total term in months, and number of payments already made. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual interest rate to monthly?
A: Divide the annual rate by 12 (e.g., 6% annual = 0.06/12 = 0.005 monthly).

Q2: Does this work for any type of loan?
A: This formula works for standard amortizing loans with fixed rates and equal payments (most mortgages, car loans).

Q3: Why does my balance decrease slowly at first?
A: Early payments are mostly interest; principal reduction accelerates over time.

Q4: How accurate is this calculation?
A: Very accurate for fixed-rate loans, but doesn't account for extra payments or rate changes.

Q5: Can I use this for credit card debt?
A: Not directly, as credit cards typically use different repayment structures.