What is a Payment Amortization Schedule?

A payment amortization schedule is a financial timetable that provides a borrower with detailed information about the periodic payoff of a debt. Banks, credit unions and other financial lending institutions often use payment amortization schedules to calculate payment amounts due from borrowers on installment loans or mortgages. For example, if a borrower takes out an installment loan on a car, a bank may issue an amortization schedule that outlines the periodic payment amount and the payment timeline for paying off the car loan.

An amortization schedule usually describes how much of the total loan payment will be allocated toward paying off the loan’s principal balance. Additionally, the schedule indicates how much of each payment will be put towards interest or other fees that may be assessed on a loan. In the beginning of the schedule, the majority of a borrower’s payment is generally allocated toward interest. As the loan matures, the majority of the payment is typically applied toward reducing the principal balance.

The total loan amount, the loan’s term, the interest rate and the loan’s payment frequency are required in order to create a payment amortization schedule. Borrowers typically make monthly, biweekly, or weekly payments, as dictated by the schedule. For example, if a loan has a biweekly amortization schedule, then the borrower is responsible for remitting the required payment to the lender every other week.

A mortgage amortization schedule is a type of payment amortization schedule. It is used to detail the payoff of a mortgage on a home or other piece of real estate. In addition to showing principal and interest, mortgage amortization schedules often include expenses such as real estate taxes, homeowners insurance and mortgage insurance.

A payment amortization schedule can be a useful tool for borrowers because it allows borrowers to make regular payment amounts toward their debts. In addition, by reviewing an amortization schedule, a borrower can determine how much interest will be paid to the lender during the life of the loan. Borrowers can also use a loan amortization schedule to tabulate the amount of principal remaining on the loan.

Creating an amortization schedule calculation requires using a complex financial formula. Fortunately, most lending institutions take responsibility for initiating the schedule. A borrower can also find a number of complimentary amortization calculation tools on the Internet. These tools are typically easy to use and simply require the borrower to input the loan term, amount and interest rate. The tool then automatically creates a payment amortization schedule.