While the Amortization Calculator is a useful tool for most, if not all, amortization calculations, other calculators on this page are particularly designed for common amortization calculations.
Mortgage CalculatorCalculators for auto loans and investmentsBusiness Loan Calculator.
There are two general definitions for amortization. The first is the consistent repayment of a loan over time. The second is used in business accounting and refers to spreading the expense of an expensive and long-lasting item over multiple periods. The two are discussed in greater detail in the following sections.
When borrowers obtain a mortgage, vehicle loan, or personal loan, they often make monthly payments to the lender; these are some of the most prevalent examples of amortization. A portion of the payment covers the loan's interest, while the remaining is used to reduce the principal amount outstanding. Interest is calculated based on the current amount owed, which will drop as the principal decreases. The amortization chart illustrates this.
In contrast, credit cards are rarely amortized. They are an example of revolving debt, meaning that the outstanding balance can be continued monthly, and the amount repaid each month can be adjusted. Please use our Credit Card Calculator for more information or to perform credit card calculations, or our Credit Cards Payoff Calculator to plan a financially viable method of paying off several credit cards. Other loans that are not amortized include interest-only loans and balloon loans. The former has an interest-only payment period, whereas the latter has a substantial principal payment upon loan maturity.
An amortization schedule (also known as an amortization table) is a table that shows each periodic payment on an amortizing debt. Each estimate the calculator performs includes an annual and monthly amortization schedule above. Each installment for an amortized loan includes an interest payment and a payment toward the principal balance, which changes by pay period. An amortization schedule indicates the amount that will be paid towards each, the interest and principal paid to date, and the remaining principal balance at the end of each payment period.
Although basic amortization schedules do not account for extra payments, this does not preclude borrowers from making additional payments on their loans. Furthermore, amortization schedules do not typically include fees. In general, amortization schedules only apply to fixed-rate loans, not adjustable-rate mortgages, variable-rate loans, or lines of credit.
Certain businesses may purchase pricey things that will be used for an extended time and are considered investments. Machinery, structures, and equipment are commonly amortized items used to spread costs. From an accounting standpoint, purchasing a costly factory quarterly can skew the financials; thus, its value is amortized throughout the facility's estimated life. Although technically considered amortizing, this is most commonly referred to as the depreciation expense of an asset amortized over its estimated lifetime. Please refer to the Depreciation Calculator for further information or to perform depreciation calculations.
Amortization is commonly used in accounting to spread business expenditures and pertains to intangible assets such as patents or copyrights. Section 197 of US tax law allows the value of certain assets to be deducted monthly or annually. A calculated amortization plan, like any other, can be used to estimate payment schedules. The following are intangible assets that are frequently amortized.
• Goodwill is a quantifiable asset that represents a company's reputation.Contracts for the use of or term interests in any of the goods listed below
Some intangible assets, the most common of which is goodwill, have indefinite useful lifetimes or are "self-created" and hence cannot be lawfully amortized for tax purposes.
According to the IRS under Section 197, some assets are not considered intangibles, 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 transactions
In the United States, company startup costs, defined as costs expended to research the possibilities of creating or purchasing an active business and costs to establish an active business, can only be amortized under particular conditions. They must be expenses that can be deducted as business expenses if incurred by an already operating business, and they must be incurred before the active business begins. These costs include consultation fees, financial analysis of potential acquisitions, advertising expenses, and personnel payments, which must be expended before the business is considered operational. According to IRS rules, initial startup costs must be amortized