Amortization schedule

An amortization schedule is a table that states the periodic payments to be made as part of a loan agreement. The table may be issued by a lender to a borrower, to document the progression of future loan payments. The schedule notes the following information on each line of the table:

  • Payment number
  • Payment due date
  • Payment total
  • Interest component of payment
  • Principal component of payment
  • Ending principal balance remaining

Thus, the calculation on each line of the amortization schedule is designed to arrive at the ending principal balance, for which the calculation is:

Beginning principal balance - (Payment total - Interest expense) = Ending principal balance

The typical amortization schedule will show that a disproportionate amount of earlier payments are comprised of interest expense, while later payments contain an increasing proportion of principal.

The amortization schedule is extremely useful for accounting for each payment in a term loan, since it separates the interest and principal components of each payment. The schedule is also useful for modeling how the remaining loan liability will vary if you accelerate or delay payments, or alter their size. An amortization schedule can also encompass balloon payments and even negative amortization situations where the principal balance increases over time.

Similar Terms

An amortization schedule is also known as an amortization statement.

Related Courses

Bookkeeping Guidebook 
Corporate Finance 
Treasurer's Guidebook