# What is a Loan Amortization Schedule?

Contents

A loan amortization schedule is a table that shows each loan payment and a breakdown of the amount of interest and principal you are paying.

Checkout this video:

## Introduction

A loan amortization schedule is a table that shows each scheduled loan payment, typically on a monthly basis, and the amount of principal and interest that the payment applies to. The schedule also shows the running balance of the loan after each payment is made. Amortization schedules are commonly used for mortgages, auto loans and other types of loans.

## What is a Loan Amortization Schedule?

An amortization schedule is a table that lists each regular payment on a loan. Usually, the schedule shows the amount of principal and interest due each month, so you can see how much of your payment is going toward the principal and how much is being used to pay off interest charges. The schedule may also show the total amount of interest and principal paid over the life of the loan.

## How to Prepare a Loan Amortization Schedule

An amortization schedule is a table that lists all of the payments required to pay off a loan. The schedule shows how much principal and interest are paid each month, and how much of the loan’s balance is outstanding after each payment is made.

The most common type of loan amortization schedule is the monthly payment schedule, which lists all of the payments required to pay off a loan over a period of time. The monthly payment schedule is typically used for loans with repayment terms of one year or more.

To prepare a monthly loan amortization schedule, you will need to know the following information:

-The loan amount

-The interest rate

-The repayment term

With this information, you can use an online calculator or spreadsheet program to generate the amortization schedule.

## How to Use a Loan Amortization Schedule

An amortization schedule is a table that shows each loan payment and a breakdown of the amount of interest and principal paid. With each payment, the amount of interest paid decreases while the amount of principal paid increases. The amortization schedule can be used to see how much equity builds in a home with each mortgage payment made over time.

To calculate your mortgage payment, you will need to know your loan amount, interest rate, and term (length of the loan in years). To get an estimate of what your monthly payments might be, use a mortgage calculator. Once you have your loan information, you can create an amortization schedule using a spreadsheet program like Microsoft Excel or Google Sheets.

1. Enter your loan information into the spreadsheet. In the first row, put the labels “Payment Number,” “Interest Paid,” “Principal Paid,” and “Balance.”

2. In the second row, enter “1” in the Payment Number column, “=pmt(rate, nper, pv)” in the Interest Paid column, “=ipmt(rate, nper, pv)” in the Principal Paid column, and “=fv(rate, nper,-pv)” in the Balance column. This formula will calculate your monthly interest payment, principal payment, and remaining balance after each payment is made.

3. Copy and paste these formulas down for as many payments as you want to track ( generally 360 for a 30-year loan).

4. To see a breakdown of how much interest vs. principal is paid with each payment, create two columns next to your Payment Number column and label them “Interest Percent” and “Principal Percent.” In the cell next to your first Payment Number (row 2, column D for our example), enter “=C2/$F$2” and in the cell next to that (row 2, column E), enter “=D2/F2.” This will show what percent of your monthly payment goes towards interest and what percent goes towards principal. Copy and paste these formulas down for as many payments as you want to track.

By creating an amortization schedule, you can see how much equity builds in your home with each mortgage payment made over time. This canhelp you make informed decisions about whether or not to refinance your mortgage or make extra payments towards principal balance .

## Benefits of a Loan Amortization Schedule

An amortization schedule is a table that provides a detailed breakdown of periodic loan payments, showing the amount of principal and interest that comprise each payment until the loan is paid off at the end of its term.

A loan amortization schedule is typically generated by lenders when a borrower first takes out a loan, and it can be very helpful in managing payments and predicting when the loan will be paid off.

Some of the benefits of having an amortization schedule include:

-You can see exactly how much interest you will pay over the life of the loan, and how much principal you will pay each period.

-You can use the schedule to help you make extra payments towards your principal balance, which can save you money in interest and help you pay off your loan more quickly.

-You can see at a glance when your loan balance will be paid off, and how making different payment amounts would affect that date.

## Disadvantages of a Loan Amortization Schedule

A loan amortization schedule can have some disadvantages.

First, it can be difficult to understand. The schedule is full of numbers and jargon, and it can be tough to figure out what it all means.

Second, the schedule can be misleading. It can give you the impression that you’re making progress on your loan when you’re actually not. For example, if you make a large payment at the beginning of the loan, the remaining balance will look smaller than it actually is. That’s because the payment is applied mostly to interest, not to the principal balance.

## Conclusion

A loan amortization schedule is a tool that can be used to visualization how a loan will be paid back. It shows the amount of each payment that will go towards paying off the principal, and the amount that will go towards paying interest. an amortization schedule can also show the remaining balance of a loan after each payment has been made.