In a hurry:

 

Apply it today:

• Make an amortization table

• Confirm how much interest has been paid in given period

 

By the end of this episode you’ll learn:

• How to organize and make an amortization table

• How different payments affect the loan balance

• Why amortization has a curvilinear relationship to payment

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Have a few minutes:

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Amortization tables are a great way to illustrate the payment and balance schedule of an amortizing loan. They are also a useful way to confirm not only what the composition of each payment is (principal + interest per period) but also the amount of principal and interest paid during any given block of time.

 

We have found the use cases for amortization tables to be limited though. They are used either for illustrative purposes (making a chart of the payment pattern of a loan) or to help confirm the amount of principal and or interest paid during a period or periods.

 

Truth be told, as you progress through your academic and professional career, you tend to replace the amortization table with formulas and functions that accomplish the same use cases without building out the entire table.

 

Still, the table is a great way to learn, in a visual way, how the payment of a loan will affect the loan balance over time. We will explore the amortization table from this perspective.