In addition to returning monthly payment amounts, this amortization calculator displays a calendar, graph, and pie chart breakdown of an amortized debt.

There are additional calculators on this page that are more particularly designed for common amortization calculations, even if the Amortization Calculator can be used as a basic tool for the majority of amortization calculations, if not all of them.

Amortization: What is it?

Amortization has two general definitions. The first is the gradual and methodical repayment of a loan. The second is the practice of distributing the expense of a costly and durable item over a number of time periods and is utilized in the context of commercial accounting. The parts that follow go into greater detail about each of the two.

Repaying a Loan Gradually

Amortization is most commonly used when a borrower takes out a mortgage, auto loan, or personal loan, for which they typically make monthly payments to the lender. A portion of the payment is used to pay down the loan's interest, while the remaining portion is used to lower the principal balance.Since interest is calculated based on the current balance owed, it will gradually drop as the principal does. The amortization table allows you to observe this in action.

In contrast, credit cards are typically not amortized. They are a type of revolving debt, meaning that the amount owed each month can be changed and the remaining balance can be carried over from month to month. For more information or to perform credit card calculations, please visit our Credit Card Calculator. You may also use our Credit Cards Payoff Calculator to schedule a financially viable method of paying off several credit cards.

Use our Credit Cards Payoff Calculator to arrange a mutually beneficial payment plan for several credit cards. Interest-only loans and balloon loans are two more types of loans that aren't amortized. The latter has a sizable principal payment at loan maturity, whereas the former has an interest-only payment period.

Schedule of Amortization

An amortization schedule, also known as an amortization table, is a table that lists all of the loan's periodic payments. An annual and monthly amortization plan will be included with every calculation the calculator performs. Interest and principal balance payments are included in every repayment for an amortized loan. It changes with every pay month. The precise amount that will be paid toward each, the interest and principle that have been paid thus far, and the remaining principal balance at the end of each pay period are all shown on an amortization schedule.

Borrowers can still make additional loan payments even though basic amortization schedules do not account for them. Additionally, costs are typically not taken into account in amortization plans. Amortization plans typically only apply to fixed-rate loans; they do not apply to variable-rate loans, adjustable-rate mortgages, or credit lines.

Distributing Expenses

Some organizations occasionally invest in costly, long-lasting things that are utilized frequently. In order to spread costs, items like buildings, machinery, and equipment are frequently amortized. The value of a costly factory is amortized throughout the facility's anticipated life because, from an accounting standpoint, a hasty acquisition within a quarterly period can distort the financials. This is commonly known as the depreciation expense of an asset amortized over its anticipated lifetime, even though it can theoretically be regarded as amortizing. Please visit the Depreciation Calculator to learn more about depreciation or to perform calculations utilizing it.

In accounting, amortization is a method of allocating corporate expenses to intangible assets, such as a patent or copyright. The value of these assets may be subtracted on a monthly or annual basis under Section 197 of US law. A computed amortization schedule can predict payment schedules, just like with any other amortization. Intangible assets that are frequently amortized include the following:

1. Goodwill is a company's reputation that is considered a measurable asset.
2. Going-concern value is a company's worth as a continuous entity.
3. The existing workforce, which includes their training, education, and experience
4. Operating systems, business books and records, or any other database that contains lists or other data on present or potential clients
5. Formulas, procedures, designs, patterns, know-hows, formats, patents, copyrights, and related items
6. Customer-based intangibles, such as customer bases and customer relationships
7. Intangibles depending on suppliers, such as the potential worth of upcoming purchases as a result of current vendor ties
8. Governmental entities or agencies may provide licenses, permits, or other privileges (including issuances and renewals).
9. Non-competition or covenants not to compete agreements made in connection with the purchase of company or trade interests
10. Trade names, trademarks, or franchises
11. Term interests or agreements for the use of any of the things on this list

Goodwill is the most common example of an intangible asset that may not be properly amortized for tax purposes if it is "self-created" or has an infinite useful life.

Certain assets, such as interest in businesses, contracts, land, most computer software, intangible assets not acquired in connection with the acquisition of a business or trade, interest in an existing lease or sublease of tangible property or existing debt, rights to service residential mortgages (unless acquired in connection with the acquisition of a trade or business), or certain transaction costs incurred by parties in which any portion of a gain or loss is not recognized, are not considered intangibles, according to the IRS under Section 197.

Spreading Out Startup Expenses

Only specific circumstances allow for the amortization of business startup expenditures in the United States, which are defined as expenses made to explore the possibility of starting or purchasing an existing business. These expenses must be incurred prior to the start of an active business and must be deductible as business expenses if they are incurred by an already-existing, operating business. These expenses, which must be incurred prior to the business being considered active, include consultancy fees, financial analyses of possible acquisitions, advertising expenditures, and personnel compensation. Initial startup costs have to be amortized in accordance with IRS regulations.