Amortization Schedule

An amortization schedule is a table that outlines the precise repayment plan for an amortized loan, such as a mortgage or auto loan. It breaks down each payment into two components: principal and interest. The principal is the portion of the payment that reduces the outstanding balance of the loan, while the interest is the cost of borrowing the money, calculated on the remaining balance. 

They provide a clear picture of how each payment affects the loan balance and how much of each payment goes toward interest versus principal. Typically, in the early stages of the loan, a larger portion of each payment is applied to interest, with the principal repayment increasing over time.

The schedule helps borrowers understand the long-term cost of their loan and plan their finances accordingly. It can also show the effects of making extra payments, which can significantly reduce the total interest paid and shorten the loan term.