Loan Amortization Schedule Comparison

by ryan on January 16, 2018


Loan Amortization Schedule Comparison Tips and Templates


There are some financial needs that require huge amounts of cash and settling such at once can be quite challenging.


This necessitates one to apply for loans where the lenders will allow installment repayments therefore making it a bit simpler to settle such debts. Amortization is a method that you can utilize to ensure that these repayments will be equal and this will work great especially for those who earn some constant income.

How does loan amortization work?

In loan amortization, every repayment made is divided into two where one part goes towards settling the interest where the other part is used to repay part of the principal amount. Although the amounts to be settled in each period are the same, the repayments towards the interest and principal amount keep on varying. These are detailed in an amortization schedule which is simply a table that shows:

  • The exact amount paid as interest for every payment
  • The specific amount that goes towards repaying the principal balance
  • The loan balance remaining after each payment

As the balance on a given loan reduces, the amount that goes towards reducing the principal amount increases and this means that the amount that goes towards paying the interest reduces. There are situations where people end up with negative amortization and these are cases where the payments made are not enough to cover the expected interest charges for the specific periods. This can increase your loan balance.

Comparing loan amortization schedules


The first reason why you should utilize amortization schedules is to ensure that you pick loans that you can manage with ease. The figures in these schedules are arrived at depending on the interest rate allowed, the repayment period and the amount applied for. Since all these or some of them will vary from one lender to another, you should analyze the different amortization schedules to choose some loans that you can comfortably settle.

There are some situations where you may not need to be in debt for long more so when you can afford bigger repayments on some amounts that you owe. However, you should base the repayment period on the amount that you can put aside for each repayment without overstretching your budget. By comparing amortization tables for different loans, you can choose the most convenient repayment period depending on the amount you need and interest rate allowed.

There are various ways through which you can generate amortization schedules including straight line or linear, declining balance, bullet and annuity among others. Although other repayments will be similar, the last repayment can be lower due to small rounding offs of previous repayments which will make a huge difference over a number of years.

Improving credit rating


Loan amortization is usually a great way of ensuring that you always maintain a high credit rating which is very important when applying for funding. This is so because you will handle all your repayments promptly avoiding situations that can taint your credit like missing repayments, defaulting, home foreclosures and repossessions among others.

Sample Templates:









Previous post:

Next post: