Loan Calculator

An amortizing loan is repaid with a level payment: the same amount each period, for a fixed number of periods, until the balance reaches zero. The payment is set so that the final installment lands exactly on zero, which is what the amortization formula does:

payment = principal × r ÷ (1 − (1 + r)⁻ⁿ)

Here r is the rate for one payment period and n the total number of payments. For a monthly loan r is the annual rate divided by 12; for a weekly loan it is the annual rate divided by 52.

Each payment is applied to interest first. Interest is charged on the balance outstanding, so it falls as the loan is repaid, and the fixed payment sends the difference to principal. The result is that principal repayment accelerates towards the end of the term.

Paying more often reduces total interest, because the balance spends less time at its higher level between payments. The effect is real but modest — usually a fraction of a percent of total interest, not a transformation.

What people usually mean by "biweekly mortgage payments" is something different: paying half the monthly payment every two weeks. Because there are 26 fortnights in a year, that quietly makes 13 monthly payments instead of 12, and the extra payment is what shortens the loan — not the frequency.

This calculator uses the true periodic method: a genuine biweekly loan at a biweekly rate with 26 payments a year. If you want to model the accelerated approach, use the debt payoff calculator and add the equivalent extra payment.

The schedule is the most useful part of any loan calculation, because it shows how little of an early payment actually reduces what you owe.

On a five-year $25,000 loan at 7.5%, the first payment sends about $156 to interest and $345 to principal. On a 30-year mortgage the imbalance is far more extreme: the first payment can be 85% interest. Anyone considering refinancing, selling, or paying extra should look at where they currently sit on that curve before deciding.

The interest rate is the cost of borrowing the money. The APR — annual percentage rate — folds in origination fees, points and certain closing costs, and expresses the total as an annualised rate. It is the number designed for comparing offers.

This calculator works from the interest rate, because that is what determines your actual payment. If you are comparing two loans with different fee structures, compare their APRs; if you want to know what leaves your account each month, use the interest rate.