An Amortization Schedule is a loan payment calculator that helps you keep track of loan payments and accumulated interest. Use LawDepot’s template to generate a custom table that details:
- Payment due dates and amounts
- Principal payments (i.e., the amount paid toward debt, minus interest)
- Interest charged per payment, plus total interest charged over time
- The remaining balance after each payment
An Amortization Schedule is generally used in situations that require larger loan amounts, such as for mortgages, business operations, or large asset purchases (e.g., heavy-duty equipment or vehicles).
An Amortization Schedule is also known as a:
- Loan Amortization Schedule
- Mortgage Amortization
- Loan Payment Schedule
How does amortization work?
Amortized loans separate the payments for the original debt (i.e., the principal) and interest (calculated as a percentage of the balance owed) over the length of the loan agreement.
When scheduling recurring payments, the total expense remains the same each time. However, the amounts from each payment that go toward the principal or interest will differ over the loan term.
Initially, the borrower pays more in interest. But, as time goes on and they chip away at the principal amount, they pay less in interest and more towards the principal.
Consider the following example:
- A loan amount of $100,000
- Monthly payments of $899.93 over a 15-year period
- An interest rate of 7.25% compounded yearly
For the first payment of $899.93, $584.97 goes toward interest while $314.96 goes to the principal. With each debt repayment, the amount of interest charged lessens. As a result, the borrower pays more towards the principal. At the end of the loan term, the final payment of $899.93 would contribute $894.51 toward the principal and only $5.23 interest.
