Understanding Your Loan

When you take out a loan—whether for a mortgage, car, or personal use—you pay back the principal (the amount you borrowed) plus interest. Our Smart Finance Calculator uses the standard amortization formula to show you exactly where your money goes.

What is Amortization?

Amortization is the process of spreading out a loan into a series of fixed payments over time. While your total monthly payment remains the same, the portion that goes towards interest vs. principal changes every month.

• Early Years: Most of your payment goes toward interest.
• Later Years: Most of your payment goes toward paying off the principal.

How to Save Money

Even small extra payments toward your principal can drastically reduce your loan term and total interest paid. Use this tool to experiment: try reducing your interest rate by just 0.5% or shortening your term by 5 years to see the massive difference in total cost.