What is the purpose of an amortization calculator?

An amortization calculator serves the purpose of showing borrowers how their loan repayments will be structured over time. It breaks down the repayment schedule, illustrating how each payment consists of both principal and interest components. This allows borrowers to see how their loan balance decreases over the life of the loan and understand the overall cost of borrowing, including the total amount paid over the term of the loan.

By displaying the details of each payment throughout the amortization period, borrowers gain valuable insights into how making extra payments or paying off the loan early can affect the overall financial obligation. This tool is crucial for understanding long-term financial commitments associated with loans, such as mortgages, and helps borrowers make informed decisions regarding their financing options.