# Amortization Schedule

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## Definition of 'Amortization Schedule'

An amortization schedule is a table that shows how the principal and interest payments on a loan are allocated over time. It is used to track the progress of a loan repayment and to ensure that the loan is paid off on time.

The amortization schedule is based on the following information:

* The loan amount
* The interest rate
* The term of the loan
* The payment frequency

The amortization schedule shows how much of each payment is applied to the principal and how much is applied to interest. The principal balance decreases over time, and the interest payments decrease as well.

The amortization schedule is a valuable tool for borrowers and lenders. It can help borrowers to understand how much they will be paying each month and how long it will take to pay off the loan. It can also help lenders to track the progress of a loan and to ensure that it is repaid on time.

Here is an example of an amortization schedule for a \$100,000 loan with an interest rate of 5% and a term of 30 years:

| Payment Number | Principal Payment | Interest Payment | Outstanding Balance |
|---|---|---|---|
| 1 | \$250 | \$416.67 | \$97,500 |
| 2 | \$250 | \$416.67 | \$97,250 |
| 3 | \$250 | \$416.67 | \$97,000 |
| 4 | \$250 | \$416.67 | \$96,750 |
| 5 | \$250 | \$416.67 | \$96,500 |
| ... | ... | ... | ... |
| 30 | \$250 | \$16.67 | \$0 |

As you can see, the principal balance decreases over time, and the interest payments decrease as well. The final payment is only \$16.67, which is the interest that is due on the remaining balance of \$0.

Amortization schedules are typically provided by lenders when a loan is originated. They can also be found online from a variety of sources.

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