How Loan Amortization Really Works

A fixed payment hides a moving split between interest and principal. Here is a full 30-year loan, month by month.

Last updated: October 12, 2026. Every figure below was computed with this site's own payment and amortization code on that date. The CFPB page cited was read the same day. No rate or price data is used, only the example inputs.

The setup

Take a $250,000 loan at 6.5% a year over 30 years. These are example inputs, not a quote. The fixed monthly payment is $1,580.17 and, if you never pay extra, you will make 360 of them: $568,861 in total, of which $318,861 is interest. You can reproduce every number on this page in the loan calculator.

The payment never changes, but what it is made of changes every single month. That is amortization: each payment first covers the interest that has built up on the current balance, and only the remainder reduces the balance.

Month one, in detail

The monthly rate is 6.5% divided by 12, or about 0.5417%. On a $250,000 balance that is $1,354.17 of interest in the first month. Subtract it from the $1,580.17 payment and only $226.00 goes to principal. The balance drops to $249,774. In month two the interest is calculated on the smaller balance ($1,352.94), so $227.23 goes to principal, and so on. The principal share grows by roughly half a percent every month, a slow compounding in your favour.

Snapshots across the 30 years

Look at the middle of the table. Halfway through the loan, after 15 years, you have paid $284,430 in payments but the balance has only fallen from $250,000 to $181,398. The crossover, the first month in which more than half the payment is principal, arrives at month 233, almost 19.5 years in.

Why the first decade feels so slow

Over the first 10 years you pay $151,561 of interest, which is 47.5% of all the interest on the loan, yet you have repaid only $38,060 of principal, or 15.2% of the amount borrowed. The cause is simple: interest is the balance multiplied by the rate, and the balance is largest at the start. A balance cannot shrink faster than the portion of the payment above the interest, and that portion starts small.

This is also why a loan that seems "mostly paid off" by the calendar is not. The balance only falls below half of the original, $125,000, around month 257, more than 21 years in.

What a shorter term changes

Run the same $250,000 at 6.5% over 15 years and the payment is $2,177.77, which is $597.60 more every month. In exchange the total interest falls to $141,998, a saving of $176,863 compared with the 30-year loan. The shorter loan does not have a magic lower rate; it simply gives interest less time to accumulate on a balance that shrinks much faster. Whether the higher payment fits your budget is the real question, and the loan comparison page lets you put two terms side by side.

What a lower rate changes

Keep the 30-year term but drop the rate to 5.75% and the payment becomes $1,458.93, which is $121.24 a month less. Total interest is $275,216, or $43,645 lower. Three-quarters of a percentage point is worth that much because it applies to a large balance for a long time. When comparing offers, look at the APR as well as the rate: the CFPB explains that the APR includes points and other loan charges, so it is usually higher than the interest rate alone.

How to use this knowledge

• Extra principal is most valuable early. A dollar paid in month 12 stops interest on that dollar for the remaining 29 years. See extra payment strategies for the numbers.
• Check the early-year interest before you refinance. A refinance restarts the front-loaded schedule unless you keep the remaining term.
• Read your own schedule. Compare your lender's interest and principal split to a calculator run to catch fees or rounding differences.

Try your own numbers in the loan calculator. These guides are for education and are not financial, tax, legal or insurance advice. Nothing you type into the calculators is sent anywhere.