Equal Principal Amortization Calculator
Fixed principal portion every period, declining payments, full schedule, total interest — plus a side-by-side comparison with a standard equal-payment (annuity) loan.
Educational estimate — not professional financial advice. All calculations run locally in your browser; nothing is uploaded.
Calculate your schedule
Your equal-principal schedule
Share of each dollar paid that goes to principal vs interest.
Equal principal vs standard equal-payment loan
Same amount, rate and term — the only difference is the repayment method.
| Equal principal (this tool) | Equal payment (annuity) |
|---|
Yearly summary
| Year | Payments | Principal paid | Interest paid | Balance end |
|---|
Full payment schedule
How the math works
Let P = loan amount, n = number of payments, r = interest rate per period (annual rate ÷ payments per year).
P / nInterest in period k:
balance at start of k × rPayment in period k:
(P / n) + interest in kTotal interest:
r × P × (n + 1) / 2
Because the principal chunk never changes while interest is charged on a shrinking balance, payments decline in a straight line. The annuity (equal-payment) payment used for comparison is P × r / (1 − (1 + r)^(−n)).
Worked example
Borrow $12,000 at 6% annual, repaid monthly over 12 months:
Month 1: interest = 12,000 × 0.5% = $60 → payment $1,060
Month 12: interest = 1,000 × 0.5% = $5 → payment $1,005
Total interest = $390 · Total paid = $12,390
The equivalent equal-payment loan would charge $1,032.80/month and $393.57 total interest — slightly more, with a lower starting payment.
Frequently asked questions
What is an equal principal payment loan?
An equal principal payment loan (also called straight-line or constant amortization) splits the borrowed principal into identical chunks: each period you repay principal divided by the number of payments. Interest for the period is charged on the remaining balance, so each payment equals the fixed principal chunk plus that period's interest, and payments decline over time as the balance shrinks.
How is equal principal different from a standard amortization loan?
A standard amortization loan (annuity) keeps every payment equal: the principal portion grows while the interest portion shrinks. An equal principal loan does the opposite: the principal portion is fixed every period while the total payment shrinks. Equal principal repays the balance faster, so total interest is lower, but the first payments are higher than the equivalent annuity payment. Use our loan amortization calculator if you want the standard equal-payment version.
What is the equal principal payment formula?
Let P be the loan amount, n the number of payments, and r the interest rate per period. Principal per period = P / n (constant). Interest in period k = remaining balance at the start of period k x r. Payment in period k = P / n + interest in period k. Total interest over the whole loan = r x P x (n + 1) / 2.
Does equal principal save interest compared to equal payments?
Yes, mathematically an equal principal schedule always costs less total interest than an equal-payment (annuity) schedule at the same rate and term, because principal is repaid faster from the start. The trade-off is cash flow: the first equal-principal payments are noticeably higher than the flat annuity payment, so it suits borrowers who can afford higher payments early or expect rising income.
When are equal principal loans used?
Equal principal schedules are common for commercial and equipment loans, some corporate bonds, and mortgages in several Asian markets (known locally as declining-balance or equal-principal mortgages). Lenders also use them for borrowers whose income is expected to grow, since the burden lightens over time.
Why do payments decline each period?
Because the principal chunk is fixed while interest is charged on a shrinking balance. Each period the balance drops by P / n, so next period's interest is smaller and the total payment (fixed principal + smaller interest) declines. With a positive interest rate, every payment is smaller than the previous one.
What happens with a 0% interest rate?
With 0% interest every payment is identical and equals the principal divided by the number of payments (P / n), total interest is zero, and the total paid equals the loan amount. The declining-payment effect only appears when the interest rate is above zero.
Does this calculator handle extra or early payments?
No. This calculator assumes the pure equal-principal schedule with no extra, skipped, or early payments and a fixed interest rate for the whole term. If you plan extra principal payments, use a calculator built for that scenario instead.
Are the totals exact or estimates?
The math is exact for the stated assumptions: fixed rate, no fees, no taxes, no insurance, and payments made on schedule. Real loans add fees, rounding rules, and payment timing differences, so treat the results as estimates and confirm the official schedule with your lender.
How does the calculator handle rounding?
Displayed values are rounded to two decimals for readability. Internally the full precision is kept and the final balance is forced to exactly zero, so the schedule always closes cleanly even when P / n does not divide evenly.
Is this financial advice?
No. This tool is an educational estimate, not professional financial advice. Loan choice depends on your income, risk tolerance, tax situation, and local regulations. Consult a licensed financial advisor or your lender before signing anything.
Where can I calculate a standard equal-payment amortization schedule?
Use our standard loan amortization calculator, which computes the classic equal-payment (annuity) schedule with a fixed monthly payment. Comparing both tools side by side shows exactly how much interest the equal-principal method saves for your loan.
Related calculators
- Loan amortization calculator — the standard equal-payment (annuity) schedule.
- Bank loan calculator — quick loan cost estimate.
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