Amortisation Schedule

An amortisation schedule is a detailed table of periodic loan payments, showing the amount of principal and the amount of interest that comprise each payment until the loan is paid off at the end of its term.

While each periodic payment is the same amount early in the schedule, the majority of each payment is what's owed in interest; later in the schedule, the majority of each payment covers the loan's principal. This schedule is most commonly associated with mortgages, but it can also be used for other types of instalment loans.

Do I Need One?

• Borrowers
• Lenders and Financial Institutions
• Real Estate Professionals
• Investors
• Accountants and Financial Planners:
• Businesses
• Individuals with Personal Loans
• Regulatory Authorities

How an Amortisation Schedule Benefits People and Businesses:

• Clear Understanding of Payment Breakdown: The schedule provides a clear and detailed breakdown of each payment into its principal and interest components. This helps borrowers understand how much of their payment is going toward the loan balance versus how much is going toward interest.

• Loan Tracking: Borrowers can track the remaining balance of their loan. By doing so, they can see how much they still owe and how each payment affects that balance.

• Planning and Budgeting: Knowing the exact amount of each future payment aids in budgeting and financial planning. This can be particularly useful for individuals and businesses trying to manage their finances effectively.

• Prepayment Considerations: If a borrower is considering making additional payments to pay off a loan early, an amortization schedule can help them see how such payments might affect the loan's total interest and term.

• Interest Savings: By understanding how much interest accrues over the life of the loan, borrowers might be motivated to secure a loan with a shorter term or to make additional principal payments to save on interest.

• Tax Implications: For businesses, understanding the interest portion of their payments can be vital for tax reporting, as interest payments on business loans are typically tax-deductible.

• Decision Making: When considering a loan, seeing a full amortisation schedule can influence decision-making. For example, a borrower might choose a 15-year mortgage over a 30-year mortgage after seeing the difference in total interest payments.

• Refinancing Decisions: For homeowners or businesses with mortgages, understanding where they stand in their amortisation schedule can be crucial when considering refinancing. If they've already paid a significant amount of interest and are mostly paying principal, refinancing might not make sense.

• Transparency: For lenders, providing an amortisation schedule demonstrates transparency, building trust with borrowers by showing them exactly how their payments are applied.

• Comparison: When shopping for loans, borrowers can request amortisation schedules for various terms, rates, and loan amounts. Comparing these can provide a clearer picture of which loan might be most beneficial in the long run.