What is a Monthly Amortization Schedule?

A monthly amortization schedule is a statement that shows how much is left to be paid on a loan if payments are made on time. Typically, the amortization schedule will be broken down based on the amount of principle and interest remaining. Each will be listed in separate columns, along with a total outstanding balance and possibly even a statement of what has already been paid. A monthly amortization schedule is a tool many use for long-term financial planning.

Most schedules are monthly, simply because this is the most common way by which to pay off loans. Mortgage amortization schedules and vehicle loan schedules are almost exclusively based on monthly payments. In contrast, a biweekly amortization schedule is a statement that breaks things down every two weeks for loans that are paid in such a manner.

The major limitation of a traditional monthly amortization schedule is in the fact that it does not anticipate any changes. Changes common to loans include variable interest rates and late payment fees. These will all affect the true loan payoff date. Still, for those who plan on keeping to the schedule as outlined and have a fixed interest rate for the life of the loan, amortization schedules can be very helpful.

While a monthly amortization schedule may be printed on paper, it can also be interactive. These interactive models are computer based and available online. An amortization schedule calculation is based on the amount borrowed, interest rate, length of the loan, and how often payments are made. An amortization calculator online can then show what the schedule will be. Most are set up to display a monthly schedule, and if a loan is paid biweekly it may be hard to find a calculator that offers the service.

A monthly amortization schedule is also good at showing borrowers how much they will be paying in interest over the life of the loan. For example, on a mortgage loan worth $100,000 US Dollars (USD) at 4.375% interest, the monthly amortization schedule reveals nearly $80,000 USD in interest will be paid over the life of the loan. Using an interactive amortization calculator, it can also show how paying just a little more of the principle each month will reduce that interest payment.

If a borrower has questions about how much of a payment is going to pay for principle and how much for interest, a monthly amortization schedule can also be helpful. This may be important, especially for those who are able to deduct the interest paid from their income taxes. While the mortgage lender should send the borrower a statement of what was paid annually, the amortization schedule will help individuals plan ahead.