Amortization Schedule: How to Read One in 4 Simple Steps

An amortization schedule is a table that shows, payment by payment, how much of each instalment on a loan goes to interest and how much reduces the balance. It is the clearest way to see why a long mortgage costs so much more than its headline price, and why extra payments early on have such a large effect.

Updated September 2026. General information, not financial advice. The examples are illustrative and use round numbers that work in any currency.

What an amortization schedule shows

Amortization simply means paying off a debt through regular payments so the balance falls to zero by the end of the term. The US Consumer Financial Protection Bureau describes the schedule as the chart showing how each payment is split between principal and interest. A typical table has one row per payment and five columns:

• Payment number or date. Month 1 through to the final month.
• Payment amount. On a fixed-rate loan this stays the same every month.
• Interest portion. The balance multiplied by the periodic rate.
• Principal portion. Whatever is left of the payment after interest.
• Remaining balance. The previous balance minus the principal portion.

Mortgage statements in some countries add columns for tax and insurance held in escrow. Those amounts pass through to other bills and do not reduce the loan, so read them separately.

The formula behind the payment

Every fixed payment on a standard amortizing loan comes from one formula. With P as the amount borrowed, r as the monthly rate (the annual rate divided by 12) and n as the number of monthly payments:

Payment = P × r ÷ (1 − (1 + r)⁻ⁿ)

The formula chooses the one payment that, applied month after month, clears both the interest and the balance exactly on the last payment. You do not need to work it by hand: our loan repayment calculator does the arithmetic in your browser.

Reading an amortization schedule in 4 steps

1. Check the payment against the offer. The payment column should match the figure in your loan agreement. If it does not, the schedule may be using a different rate, term or start date.
2. Look at the first few rows. Note how much of the payment is interest. Early on it is usually the larger share, which is expected rather than a sign of a bad loan.
3. Find the crossover point. Scan down until the principal portion exceeds the interest portion. On long loans this can take many years.
4. Read the totals. Add up the interest column, or multiply the payment by the number of payments and subtract the amount borrowed. That total is the true cost of the loan.

A worked example: 200,000 over 30 years at 6 percent

Take an illustrative fixed-rate loan of 200,000 at 6 percent a year, repaid monthly over 30 years (360 payments). The monthly rate is 0.5 percent and the formula gives a payment of 1,199.10. The first three rows of the schedule look like this:

• Month 1: interest 1,000.00, principal 199.10, balance 199,800.90.
• Month 2: interest 999.00, principal 200.10, balance 199,600.80.
• Month 3: interest 998.00, principal 201.10, balance 199,399.71.

In month 1, more than 83 percent of the payment is interest. The principal share grows by about a unit each month because the balance, and therefore the interest charged on it, shrinks slightly. The CFPB makes the same point: payments go mostly to interest at the start of a loan and mostly to principal near the end.

Following the schedule further shows three things worth knowing:

• The crossover arrives at payment 223, more than 18 years in. Only from then on does each payment reduce the balance by more than it pays in interest.
• After 10 years the balance is still 167,371.45. A third of the term has passed and about 16 percent of the loan has been repaid.
• Total interest over 30 years is 231,676.38, more than the amount borrowed. Total repaid is 431,676.38.

How term length changes the schedule

The same 200,000 at 6 percent over 15 years needs a payment of 1,687.71, which is higher each month, but total interest drops to 103,788.46. The CFPB notes this trade-off for car loans too: a longer term lowers the monthly payment and raises the total interest paid. An amortization schedule puts both numbers in front of you so you can decide which matters more.

What extra payments do to an amortization schedule

Because interest is charged on the remaining balance, any extra money that reduces the principal also reduces every future interest charge. In the example above, adding 100 a month to the 1,199.10 payment clears the loan after 295 payments instead of 360, more than five years sooner, and total interest falls to 182,537.97. That is a saving of 49,138.41 from 100 a month.

Two conditions apply. The lender must put the extra towards principal rather than holding it against the next payment, and the loan must not carry an early repayment charge large enough to cancel the saving. Check both in your agreement before you start.

Simple interest and precomputed loans

The CFPB explains that most car loans use simple interest, where interest is worked out daily or monthly on the balance actually outstanding, so paying early saves money. A less common precomputed loan adds the interest to the balance at the start, so paying ahead may save little. The schedule above assumes a standard amortizing loan. Our guide to simple interest vs compound interest explains how these methods differ.

Where to get your own amortization schedule

• Ask the lender. Many will provide one on request or show it in online account tools.
• Build one in a spreadsheet. Put the payment in one cell, then each row calculates interest as balance times monthly rate, principal as payment minus interest, and the new balance.
• Use a calculator. Enter the amount, rate and term to see the payment and total interest in seconds.

When comparing offers, remember that the rate used in a schedule is the interest rate, not the APR, which also folds in fees. Our explainer on APR vs interest rate covers why the two differ, and how interest rates are set explains why a variable-rate schedule can change during the loan.

Common questions

What is an amortization schedule? It is a table listing every payment on a loan, showing how much goes to interest, how much reduces the principal, and the balance left after each payment.

Why is most of my early payment interest? Interest is charged on the outstanding balance, which is highest at the start. As the balance falls, the interest part shrinks and more of each fixed payment goes to principal.

Does an amortization schedule change if I pay extra? Yes. Extra payments applied to principal lower the balance, which reduces future interest and shortens the loan, as long as the lender applies them that way and no early repayment charge outweighs the saving.

Is an amortization schedule accurate for a variable-rate loan? Only until the rate changes. Each rate change produces a new payment or a new term, so the schedule has to be recalculated from that point.

Sources and further reading

Where the figures and rules above come from, so you can check them:

• Definition of amortization and amortization schedules for car loans: US CFPB
• How principal and interest shift over a mortgage term: US CFPB
• Simple interest compared with precomputed interest: US CFPB

Photo credits: Prieur Street, Broadmoor, New Orleans – New house for sale, Sept 2023 by Infrogmation of New Orleans, CC BY-SA 4.0, via Wikimedia Commons. Calculator Numbers by Negative Space, CC0, via Stocksnap.