What Is an Amortization Schedule

An amortization schedule is a table or chart that helps you to see how each payment on a loan will be applied to both the principal balance and the interest owed on that loan. The schedule outlines planned payments over the course of the loan, usually with monthly payments over a fixed period of time. This can help you to understand the details of your loan agreement, often at a glance, including how much of each payment goes toward reducing your balance of principal, and how much goes toward interest charges. An amortization schedule also shows when you will reach milestones such as achieving a certain percentage paid off and owing less than what was borrowed.

What Is an Amortization Schedule?

An amortization schedule is used to determine the repayment schedule of a loan or other financial instrument. The schedule typically shows the payments made over the life of the loan, which includes the principal and interest payments, as well as any additional charges. It also shows how much of each payment goes towards the principal balance and how much is paid in interest. Understanding an amortization schedule can help you manage your finances and make the most of your money.


An amortization schedule is a table from which individual or business borrowers can understand how their loan is paid off over time. The schedule will include details of the loan including the type of loan, interest rate, payment amount and timeline for repayment. It will also include information about the principal amount of each payment, the total interest expense and total payments due over time.

The amortization schedule can be used for both secured and unsecured loans, however it may be less applicable to short-term or revolving debt instruments such as credit cards or overdrafts.
The main purpose of an amortization schedule is to help borrowers control their budgeting enabling them to plan out loan repayments in advance. This can potentially reduce potential financial strain when trying to manage budgeted amounts over multiple repayment periods, allowing borrowers to remain on top of their finances. Additionally, an effective amortization schedule provides a clear picture into how interest rates and extra payments affect underlying loans.


An amortization schedule can be helpful for a variety of purposes. Understanding how payments will be applied over time allows borrowers to make smarter decisions about lending and borrowing by accounting for the total cost of whatever it is they’re financing or investing in. It’s also commonly used to pay off student loans and other forms of debt, as well as mortgages.

For students, an amortization schedule can help them determine the total cost of their loan over time, including interest charges if applicable. For homeowners, an amortization schedule can help them plan ahead for when they will have their mortgage paid off, as well as how much interest they are paying in total over the life of their loan. Similarly, businesses may use amortization schedules to determine how best to allocate their funds for long-term investments or major projects.

The amortization schedule is generated by a series of calculations that takes into account factors such as the amount borrowed or invested, annual interest rate and timeline (monthly payment or repayment period) chosen by the borrower or investor. The resulting table outlines how each payment applies towards principal balance versus interest due with a detailed breakdown of payments over time until the balance is fully repaid at which point no more payments are due. This provides transparency into costs associated with borrowing or investing money and helps consumers make better credit decisions while creating a path to financial freedom down the road.

How to Create an Amortization Schedule

An amortization schedule is an important tool for managing your debt. It will provide you with a structured payment plan and show you how much of each payment goes towards paying the interest and principal. Creating an amortization schedule can help you understand your payment plan and ensure that you keep up with your payments. In this article, we will show you how to create an amortization schedule.

Calculate the loan amount

In order to create an amortization schedule the lender needs to know the amount to be financed (the loan amount). The loan amount is typically the purchase price or cost of something, minus any down payment or other deposit. For example, if you’re buying a car for $25,000 and have put a $5,000 down payment on it, then the loan amount would be $20,000.

The lender will then use this loan amount along with the interest rate and term of the loan in order to calculate your monthly payments and determine what your overall balance may look like at various points in time. The lender will also require information about your taxes and insurance, as these expenses may need to be included when calculating a monthly payment for your amortization schedule.

Calculate the interest rate

To create an amortization schedule, one of the first steps is to calculate the interest rate of a loan. This can be done by dividing the annual interest rate by 12 for each month in the year. For example, if a mortgage has an annual interest rate of 5 percent, this would equate to 0.416 percent per month (5 divided by 12). It is also important to remember that some mortgages have a fixed interest rate while others may have a variable interest rate that changes throughout the repayment period. If you are unsure, check with your lender or financial advisor before beginning your calculations. Once you know your fixed or variable rate and the corresponding monthly percentage, you can use it to begin calculating your amortization schedule.

Calculate the loan term

Knowing the loan term is key to calculating an amortization schedule. Estimate the total loan amount by adding the principal and any applicable fees, such as origination or processing fees. Calculate the amount of time needed to repay this amount by dividing the loan amounts into equal monthly payments. The term could be as short as a few months or be extended as long as several years — it all depends on how much you are borrowing and how large your monthly payments will be. Depending on the lender, terms may be expressed in months or years so use an appropriate conversion factor if needed.

Once you know the term of repayment, you can determine how much interest needs to be paid over that period of time. Multiply the loan principal or outstanding balance times an appropriate interest rate for that period (e.g., “annual percentage rate” expressed over a 12-month period). This will tell you exactly how much interest must be paid during each payment interval (monthly, quarterly, etc) throughout that duration of time.

In order to calculate your total monthly payment amount, simply add together the loan principal plus any applicable fees/taxes with any interest incurred in that particular payment interval. This will produce what is known as a “range” each month – accounting for varying amounts of interest due (as it accrues) and helping ensure that all applicable taxes and fees are accounted for in your total repayment calculation.

Calculate the periodic payment

Calculating the periodic loan payment for an amortization schedule is done using the same concept used to calculate payments for any loan — the present value (or PV) formula. This formula uses the amount of the loan, the term of repayment, and the current interest rate.

The present value formula is slightly different when a bond or a mortgage has been issued. The major difference between a loan and a bond or mortgage is that in the latter two instances, each payment includes both principal and interest. The lender earns interest on the amortized loan by gradually collecting predetermined payments covering both principal and interest until all that remains of the debt is paid off.

When designing an amortization schedule, you must first calculate what is called a periodic payment amount, which covers both principal and interest along with any other money due in each period (usually monthly). This calculation takes into account all of these variables, such as:
-Loan amount
-Interest rate
-Term of repayment
-Amounts due for taxes and insurance
-Amounts due for fees or penalties if any

Once you have completed this calculation, subtracting other charges from each payment done manually, subsequently creating an amortization table will be easy as you merely have to compute how much goes towards principal from each payment as well as tracking when does that reduced principal yields lesser total payments.

Create the amortization schedule

Creating an amortization schedule is not difficult, but it does require you to understand amortization terminology. An amortization schedule is a table that shows each loan payment and the remaining principal balance after each payment. The most important information you will need are the total loan amount, the annual interest rate and loan term or length. For example, if you have a loan for $20,000 at an interest rate of 5% for 10 years, then your table will look like this:

● Total loan amount: $20,000
● Annual interest rate: 5%
● Loan term: 10 years

The next step in creating an amortization schedule is to calculate the monthly payment. To do this, use this formula (Note that “PV” stands for present value and “r” stands for periodic rate.):

Monthly payment = PV x [r(1 + r)^n]/[(1 + r)^n – 1]

where “n” stands for total number of payments (In our example above n = 120 since there are 10 years with 12 payments per year). In our example below we will assume payments are made at the end of each month. Therefore n = 120:
Monthly payment = 20000 x [0.004167(1 + 0.004167)^120]/[(1 + 0.004167)^120 – 1]= $174.93

Now that you know how much your monthly payment is ($174.93), you can begin creating your amortization schedule by entering in the column headings shown below:

● Payment #
● Payment Date
● Beginning Balance
● Payment Amount
● Principal Paid
● Interest Paid
● Ending Balance

Check out Debt-to-income ratio here, or Loan terms here.

Benefits of an Amortization Schedule

An amortization schedule is a helpful tool that provides a detailed breakdown of recurring loan payments over the life of the loan. By using an amortization schedule, you can easily track your payments and due dates, as well as the total amount of interest you will pay over the life of the loan. Additionally, an amortization schedule can also help you plan for future payments and plan accordingly for budgeting. Let’s dive further into the details of an amortization schedule and the benefits of using one.

Understand loan payments

An amortization schedule is a complete table of periodic loan payments, showing the amount of principal and the amount of interest that mobilize each payment. This schedule shows how much you owe on your loan at any given time and allows you to understand your loan payments better.

By understanding how the amortization process works over time, you can better manage your finances and make smarter decisions about debt repayment. It also gives you a greater sense of control when it comes to making loan payments, or understanding when it’s best to pay extra towards principal.

An amortization schedule helps show that each payment on a mortgage has two parts: principal repayment and interest. Over the course of your loan’s life, more money goes towards paying interest in earlier months as opposed to principal repayment — but don’t worry! As more payments are made, more money goes toward reducing the outstanding balance due.

In other words, an amortized loan decreases over time until it is paid off without ballooning or having any negative impacts on cash flow. Breaking up your monthly payment into these two components provides guidelines for smarter spending decision that may even save you money overall in the long run!

Track loan progress

An amortization schedule is a helpful tool for borrowers to track their loan progress and manage their finances. This type of schedule is essentially a repayment plan that divides the total loan amount into equal payments that span across a defined repayment period. Each payment includes an amount for principal, as well as interest payments.

As the borrower pays off the loan, their outstanding principal balance and remaining months in repayment will decrease. This makes it easy to track how far along you are in your loan progress without having to calculate it manually or remember what your original loan amount was.

By tracking your loan progress, borrowers can easily adjust their budget accordingly or make extra payments if they choose in order to pay off the loan sooner and save money on interest costs. The amortization schedule also tracks interest charges over time and allows borrowers to allocate more of each monthly payment towards principal balance reducing overall debt more quickly and lowering total cost of borrowing.

Monitor interest costs

An amortization schedule can allow you to easily monitor your interest costs. Your loan principal will reduce as you make payments, but the portion of your payment that goes toward paying off interest will also reduce each month. Knowing how much of your monthly payments go towards interest versus principal is a critical component of budgeting and long-term financial planning. Being able to see this displayed in the form of an amortization schedule can help you plan for other expenses and potentially borrow money more wisely in the future.


An amortization schedule is a table that outlines the period of time, the interest rate and amount of each payment needed to pay off a loan or debt. By breaking down the total balance into smaller payments over time, amortization helps borrowers and lenders alike organize their finances.

For borrowers, an amortization schedule allows access to a loan calculator or spreadsheet, enabling them to see how much principal and interest is included in each payment. This way, borrowers can easily tell when the majority of their payments are going towards paying down their principal balance rather than just covering interest costs.

For lenders, understanding what amount and when payments are due helps streamline the repayment process. Lenders can also prepare additional advice on how to maximize repayments to reduce total interest costs over time — offers that are appreciated by many borrowers as it gives them greater control over managing their debt.

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