Understanding Amortization Schedule

 

An Excel Amortization Schedule

The statement of repayment is the most important part, when you are going to take a loan. It tells you the amounts you are required to pay the bank on monthly basis. The repayment schedule is popularly known as Amortization schedule. It is numbers and calculations which confuses most of the people. But once you understand the Amortization schedule you can take charge of paying and nobody can fool around with you. Not even the bank people. MS-Excel can be used to make a schedule.

Today we are just going to start with understanding a few terms that are used in the schedule. They are technical but very easy to understand They are:

  • Principal: The total amount that you have borrowed from the bank. For example if you have applied for $ 30000 loan and the granted loan amount is $ 25000 then your principal is the $25000 you receive from the bank. It is not the application amount of $30000 but the loan amount actually received $25000.
  • Interest rate: A percentage of the Principal will be charged by the bank. This is the fees for using the bank’s money. It will be the part of your installment every month.
  • Term – The period for which the loan is granted is called the term. For example if you are getting you $25000 loan for 48 months then 48 months is the term of the loan.
  • Amortization –The table showing the monthly installments is called the Amortization schedule. It will have all the terms discussed above.

After understanding the terms you will be better equipped to handle the repayment of the loan. For more information you can visit ferratum UK.They have an amazing collection of blogs which will make you understand about various kinds of loans. Also there are amazing online calculators which you can use.

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