Amortization Schedule

Anyone who borrows money from a bank or other lender is likely to get an loan amortization schedule to review. This document shows the true dollars and cents behind loan repayment. An auto loan amortization schedule is slightly different from the one you get when you apply for a home loan. In fact, it much easier to understand and digest.

Like a mortgage loan amortization schedule, an auto amortization schedule shows a full breakdown of payments and how they work. To create this important document, lenders use the amount borrowed, or principal, the interest rate and the number of payments. From these figures, they calculate a set payment amount. Lenders can also fix the total interest charges for the full term of the loan.

A comprehensive car loan amortization schedule will show:

• Number of payments. You can find a breakdown of each payment and the number of times you will pay for the entire term of the loan.
• Payment amount. The schedule will show the payment amount and how your lender will apply it to service your loan. Two columns that add up to the payment amount will be present. The first column will represent the payment that will go to reduce the principal. The second will show how much of a payment is going to the bank or lender in the form of an interest payment.
• Balance. The schedule will typically also show the outstanding principal balance after the lender applies a payment. Because of interest charges, the principal amount will go down gradually at first with dramatic declines as the loan nears its maturity.
• Total interest payments. The amortization schedule makes it easy to see how much you will the lender for the privilege of borrowing the money. This figure on a car loan is typically not anywhere near as scary as a 30-year mortgage loan. But it is the price you pay for using other people's money to finance your high ticket items.

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