What does an amortization schedule show?
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An amortization schedule is a table that illustrates the breakdown of every payment made toward a loan, including the principal amount and the interest paid over time. It provides a detailed account of how each payment is applied and how the loan balance gradually decreases over the loan term. To generate an amortization schedule, you need the following information:
1. Loan Amount: The initial amount borrowed.
2. Loan Term: The duration of the loan in months or years.
3. Interest Rate: The annual interest rate charged on the loan.
4. Payment Frequency: How often the payments are made (monthly, quarterly, annually).
5. Start Date: The date when the loan is originated.
With these details in hand, you can use a spreadsheet software like Microsoft Excel or Google Sheets, or an online amortization calculator. By inputting the loan details into the calculator or spreadsheet, it will calculate the monthly payment amount and create an amortization schedule demonstrating the payment breakdown over time. The schedule typically includes the payment number, payment date, beginning balance, principal paid, interest paid, and ending balance for each payment period.