What is an amortization schedule?

Amortization is the process of paying off a loan over time through regular payments. Amortization table is a table that contains the details of interest payment, principal of a loan along with the amount outstanding after each payment till the balance becomes zero.

Loan payments consist of two major components- principal and interest. At the beginning of your loan term, the interest charged on each payment is very high because the balance owed on the loan is high. As you keep paying the principal on the loan, the proportionate amount of each payment keeps reducing until nearly the entire payment becomes the principal toward the end of your loan term.

An amortization schedule shows the payoff of your loan and the amount of each payment that gets attributed to principal and interest.

An amortization schedule can be created for any type of loan. The schedule helps give you an idea of how much you are paying towards your loan and helps you in structuring your other financial plans.