Amortization Calculator & Guide

While the Amortization Calculator can serve as a basic tool for most, if not all, amortization calculations, there are other calculators available on this website that are more specifically geared for common amortization calculations.

What is Amortization?

There are two general definitions of amortization. The first is the systematic repayment of a loan over time. The second is used in business accounting and is the act of spreading the cost of an expensive and long-lived item over many periods.

Paying Off a Loan Over Time

When a borrower takes out a mortgage, car loan, or personal loan, they usually make monthly payments to the lender. Part of the payment covers interest due on the loan, and the remainder goes toward reducing the principal. Interest is computed on the current balance and becomes progressively smaller as the principal decreases.

Amortization Schedule

An amortization schedule (or table) details each periodic payment on an amortizing loan. Each repayment contains both an interest payment and a principal payment. It helps indicate the amount paid toward each and the remaining balance after each period.

Spreading Costs

In business accounting, amortization can refer to spreading the cost of expensive items over many periods, such as machinery, buildings, or equipment. Intangible assets, like patents or copyrights, may also be amortized under Section 197 of U.S. law.

Amortizing Startup Costs

Business startup costs in the U.S. can only be amortized under certain conditions, including expenses incurred before the business becomes active. Examples include consulting fees, financial analysis, advertising, and payments to employees.