Visualizing a Loan’s Amortization Table
This calculator can be used to show the balance on a loan at the end of each 12-month period, which is also known as an amortization table. The calculator needs a total of three inputs, including:
- The value initial loan value, which is also called the principal of the loan. This is the total amount of money borrowed
- The annual interest rate on the loan, also known as the finance charges
- The loan term, in years. This calculator can provide an amortization table for loans spanning from three to ten years
The calculator then provides the user with two sets of outputs:
- The first set of outputs include the monthly payment, the term of the loan (in months), the total of all payments, and the total interest paid, or finance charges
- The second set of data is the amortization table itself, showing the balance of the loan, or the remaining principal, at the end of each year (12-month period)
Note: The last year of all amortization tables will show a zero outstanding balance on the loan, this is normal and expected behavior for this calculator.
What is a Loan Amortization Table?
Car and personal loans are typically repaid by the borrower to the lender via a series of monthly payments. This process is referred to as amortizing the loan. When a borrower repays a loan, the monthly payments have two components. One part of the payment goes towards paying the finance or interest charges, which is related to the interest rate charged on the loan. The second part of the payment goes towards repaying the principal of the loan, which is the money borrowed from the lender. An amortization table shows the borrower the outstanding balance on the loan at the end of each period. This calculator provides the loan balance at the end of each period, which is typically twelve months.
Understanding Amortization Tables
Understanding the data in an amortization table can help a borrower to figure out how much money they still owe a lender. This can be useful if the borrower intends to eventually pay off the loan. The data in this table can also be useful to people thinking about taking out a loan. We’ve designed this tool to provide insights to a loan before taking one. For example, by varying the loan value, interest rate, or term of the loan, the calculator will display the monthly payment, total of all payments and the interest paid the lender. Admittedly, when interest rates are low there is not a lot of savings associated with short-term loans. When interest rates are high (greater than 7% or so), the amount of finance charges paid on a longer-term loan will be significantly higher than a shorter-term loan as demonstrated by the examples below.
Loan One
- Initial Loan Value = 20,000
- Annual Interest Rate = 3.500%
- Term = 10 Years
- Interest Paid = 3,733
Loan Two
- Initial Loan Value = 20,000
- Annual Interest Rate = 7.000%
- Term = 10 Years
- Interest Paid = 7,866
In this example we see that with a ten-year loan for 20,0000 with an interest rate of 3.500% results in finance charges of 3,733 while the same loan carrying an interest rate of 7.000% results in 7,866 in finance charges.