A Business Encyclopedia

Amortization Schedule

Definition: The Amortization Schedule is the tabular representation of the periodic payments (principal + interest) made against the loan or mortgage. This schedule clearly differentiates the portion of payment that belongs to the interest amount and the portion that relates to the principal amount and helps to know the principal balance left after each payment.

The term Amortization means, the debts paid over a period of time. Thus, an amortization schedule is prepared to keep a proper record of the payments made periodically against the loan and has a clear picture of the amount given as interest over the loan principal at the end of its term.

Generally, the larger portion of an amount paid initially goes towards interest amount and later as the loan matures and with more and more periodic payments, the larger portion goes towards the payment of the principal amount.

Suppose a loan of Rs 1,00,000 taken for the fixed period of 10 years at a rate of 4.5%, the monthly payment can be calculated by applying the following formula:

A = [i x P x (1+i)n] / [(1+i)n -1]

Where, A = Monthly payment
P= Loan’s initial amount (1,00,000)
i= monthly rate of interest (4.5%/12 = 0.375%)
n= total number of payments (120, if each payment is to be made for every 30 days, so total payments in a year shall be 12 and hence, the payments for 10 years will be 10*12 =120).

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

define reengineeringexamples of market structures in economicswhat does straddling meanansoff analysiswhats a cash cowluft and inghamjargons definition and exampleseconomics diminishing marginal utilitycapital budgeting techniquedefinition of retrenchmentlinear programming transportation problemdefinition of kioskhenri fayol 14 principles of management with examplesthe nominal group techniquemoral sausionwhat is an oligopoly marketjudgmental sampling techniqueverticle meaningmcclelland theorybrand salience definitiondifference between likert scale and semantic differential scaledefine contingency theorymoratarium periodmeaning of guerrillaallport common traitscyclicalunemploymentasnoff matrixvague means in hindireinforcement theoriesasset turnover ratio formulapolycentric staffing advantages and disadvantagesivan pavlov classical conditioningadvantages and disadvantages of brand extensionmoratorium bankadvantages and disadvantages of long term loanspaused meaningpsychographic factors in market segmentationlaissez-faire leader definitiondagoes definitionwhat is the capm formulaelectronic retailing definitionmonopolistic competition definelpc theory of leadershipspanning meaning in telugutrainings meaningequity linked saving schemeslpc leadershipconsumer equilibrium with the help of indifference curvemeaning of psychology in urdudefinition debenturesprice leadership in oligopoly marketneft maximum limitdefinition of computerizationmichael porter's 5 forces modeltotal assets turnover ratio definitionbases of segmentation in marketingfactors influencing purchase decisiondefinition of lessee and lessorvestibule training wikipediadefinition outsourcedescribe laissez-fairecost of retained earningattrition dashboardassumptions of capm explainedtravelling chequepreliminary interviewmeaning of delegation in hindidefine job enlargementlaw of demand substitution effectmonolistic competitionpoach meaningmeaning of cpmnominal gross domestic product definitionelasticity of demand explainedlpp problem