What is an amortization schedule?


Quick Answer

An amortization schedule is a table listing all of the payments of a loan. Each listing includes the total loan amount as well as the separate amounts of principal and interest paid with that particular payment. The dates of each payment are also typically listed in the schedule.

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Full Answer

The first payments on an amortization schedule are primarily payments on the interest of the loan, with a small portion of the payment being devoted to the loan's principal. As the payments continue, the payment amount on the schedule does not change, except possibly on the last payment, yet the amount of the payment that goes to the interest falls, while the amount that goes to principal rises. At the end of the schedule, nearly the entire payment amount is principal alone. The final line of the schedule lists the total amount of the loan and the total interest and principal paid throughout the life of the loan.

Amortization schedules are also commonly known as amortization tables. Their purpose, besides showing detailed payment information, is to provide details on loans that make comparing different loans easier. They also can be used to show how differing repayment times affect the price of the loan in terms of costs through interest.

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