# Amortization Calculator

 Loan Amount Loan Term years Interest Rate (APR) %

## Monthly Pay:   \$1,687.71

 Total of 180 Loan Payments \$303,788.46 Total Interest \$103,788.46
Loan Amortization Graph
Payment Breakdown

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While our Amortization Calculator can serve as a basic tool for all amortized items, we have specific calculators for common situations. For these specific purposes, it is probably better to use them instead.

### What is Amortization?

Webster's dictionary defines amortization as "the systematic repayment of a debt." There are two general uses to amortization: paying off a loan over time, or spreading the cost of an expensive and long-life 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; these are some of the most common uses of amortization. A part of the payment covers the interest due on the loan, and the remainder of the payment goes toward reducing the principal amount owed. Interest is computed on the current amount owed and thus will become progressively smaller as the principal is decreased. During the earlier stages of an amortization process, larger portions of the payments made are for interest. As time goes on, the principal portion will gradually increase until the principal becomes zero. It is possible to see this course of action at work on the amortization table.

Credit cards, on the other hand, are generally not amortized. They are called revolving debt instead, where the outstanding balances can be carried month-to-month, and the amount repaid each month can be varied. Please use our Credit Card Calculator for more information, or our Credit Cards Payoff Calculator to schedule a financially feasible way to pay off multiple credit cards. Examples of other loans that aren't amortized include interest-only loans and balloon loans. The former includes an interest-only period of payment and the latter has a large principal payment at loan maturity, both unrelated to traditionally-structured amortization schedules.

Businesses like to purchase expensive items that are used for long periods of time that are classified as investments. Commonly amortized items for the purpose of spreading costs include machinery, buildings, and equipment. From an accounting perspective, a sudden purchase of expensive factory during a quarterly period can skew the financials, so its value is amortized over the expected life of the factory instead. Although it can technically be considered amortizing, this is usually referred to as the depreciation expense of an asset amortized over its expected lifetime. Use our Depreciation Calculator to depreciate items according to conventional accounting standards.

Amortization as a way of spreading business costs generally refer to intangible assets like a patent or copyright. Under Section 197 of U.S. law, the value of these assets can be deducted month-to-month or year-to-year. Just like with any other amortization, payment schedules can be forecasted by a calculated amortization schedule. The following are intangible assets that are often amortized:

1. Goodwill, which is the reputation of a business regarded as a quantifiable asset
2. Going-concern value, which is the value of a business as an ongoing entity
3. Workforce in place (current employees, including their experience, education, and training)
4. Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers
5. Patents, copyrights, formulas, processes, designs, patterns, know-hows, formats, or similar items
6. Customer-based intangibles including customer bases and relationships with customers
7. Supplier-based intangibles including the value of future purchases due to existing relationships with vendors
8. Licenses, permits, or other rights granted by governmental units or agencies (including issuances and renewals)
9. Covenants not to compete or non-compete agreements entered relating to acquisitions of interests in trades or businesses