# Loan Amortization Schedule ## What is the Loan Amortization Schedule?

Loan amortization schedule refers to the schedule of repayment of the loan in terms of periodic payments or installments that comprise of principal amount and interest component till the end of the loan term or up to which full amount of loan is paid off.

We can get a clear understanding of this by taking an auto loan or home loan two of its examples. In case of an auto loan, or a home loan, the lender pays off the amount in several installments, which are divided into small amounts to be paid over a specific, much longer period of time by creating a loan amortization schedule.

• Initially, the first few installments that are paid out will go as the interest to be paid. Later, eventually, the installment amount paid will start to compensate for the principal loan amount.
• In this way, within the period of payback, both the interest and the borrowed by the lender are covered.
• This is the basic idea, and this also applies in the case of a business organization opting for debts to carry out certain of its operation, and this can help the firm run a smooth business with less risk and .

For eg:
Source: Loan Amortization Schedule (wallstreetmojo.com)

### Schedule of Loan Amortization in Excel (Step by Step)

Let us take a home loan example for preparing a schedule of Loan Amortization in Excel. Let us assume that a home loan is issued at the beginning of month 1.  The principal is \$1,500,000, the interest rate is 1% per month, and the term is 60 months.

Repayments are to be made at the end of each month. The loan must be fully repaid by the end of the term.

You can download this Loan Amortization Schedule in Excel here – Loan Amortization Schedule in Excel

Follow the steps to calculate loan amortization schedule.

1. Put the inputs in this standard format given below.

The first step is to input the data in a standard format. 2. Find the Monthly Payment or the EMI (Equal Monthly installments)

We use the given in Excel to easily calculate the monthly installments here. Here,
– rate = interest rate (in this example, it is the monthly interest rate of 1%)
– nper = period (in our example, this is 60)
– PV = is the loan amount of \$1.5 million
– FV = is the future value of this loan amount ( in our case, we need to fully repay the amount. Therefore FV = 0)
– type = 0 or 1; 0 is payment done at the end of the period (month), and 1 is for payments at the beginning of the period (month). Here we assume that the payment is made at the end of the month. Note the negative sign in front of the PMT formula. It is because the repayments are cash outflows for us.

3. Prepare the Loan Amortization Schedule table as given below.

The third step is to prepare the table as given below. Each payment of installments throughout the payback period for the loan amortization comprises of two things, which are principal and interest. The period of time specified as a payback period and the payment per installment is calculated on the basis of the principal and interest amount. 4. Calculate the Interest on the Beginning Balance. 5. Calculate the Balance before the Monthly Payments 6. Calculate the Principal repaid in the month. 7. Find the month-end loan balance. 8. Link the Beginning balance of next month. 9. Complete the Loan Amortization Schedule Excel Table

For the initial few installments, a greater portion of the installments comprises of the interesting part that is to be paid while the comprises the remaining smaller portion of the installment. With this, your loan amortization in excel is almost complete. 10. Check the balance at the end of the period.

As we reach the end of the , the portion of the interesting part becomes smaller and smaller, while that of the principal part becomes larger and larger. Since the loan in this example is fully amortized, the payment done at the end of the 60th month completes the payment of the entire loan amount. This completes your table of loan amortization in excel.