1. What is a Debt Payoff Schedule?

A debt payoff schedule (amortization schedule) shows how each payment is split between principal and interest over the life of a loan. It helps borrowers understand how quickly they can pay off debt and how much interest they'll pay.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( \text{balance} \) — Remaining loan balance
• \( \text{PMT} \) — Monthly payment amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)

Explanation: Each payment first covers the interest due, then reduces the principal. As the principal decreases, less goes to interest and more to principal over time.

3. Importance of Amortization

Details: Understanding amortization helps borrowers make informed decisions about extra payments, refinancing, and choosing loan terms.

4. Using the Calculator

Tips: Enter the initial loan balance, annual interest rate, and your planned monthly payment. The calculator will show how long it will take to pay off and the total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: How can I pay off my loan faster?
A: Making extra principal payments reduces total interest and payoff time significantly.

Q2: Why does most of my payment go to interest at first?
A: Early payments have more interest because the balance is higher. This shifts over time.

Q3: What happens if I pay more than the minimum?
A: Extra payments reduce principal directly, saving interest and shortening the loan term.

Q4: How does interest rate affect payoff time?
A: Higher rates mean more of each payment goes to interest, extending payoff time.

Q5: Should I prioritize high-rate or small-balance debts?
A: Mathematically, targeting highest-rate debts first saves the most money (avalanche method).