What is the amortization plan?
ASULTIZATION Plan is a table with details of the amount of each payment assigned to the principal and interest. Each payment made on a loan is divided between principal and interest. The amortization plan provides the exact amount left on the loan after each payment. The schedules are created for easy use, but the actual formula for determining the classic item is as follows:
a = Interest x Main X (1 + Interest) Number of Periods
(1 + Interest) Number of periods - 1
If the schedule uses monthly payments, the interest rate used annual interest rate divided 12 is used for the number of periods is 12 years.
The purpose of the IS amortization plan to take into account the combination of interest over time. The amount paid paid is recalculated after each payment, as the amount of principal will be reduced by part of the payment. This method results in less interest paying over the entire length of the contract because the main period decreases in every period.
The amortization schedule has five columns: time period - either month or years - outstanding balance, payment, interest and paid principal. The excellent balance is the full value of the loan, the less amount of payments received.
The amount of payment is full amount paid in every period. The value in the interest column is the part of the payment that is assigned to the interest. The value in the main column is part of the payment assigned to repay the loan.
The purpose of the amortization schedule is to provide a clear accounting of how much from each payment aimed at the principal and the total amount owed for the loan at any time. In each loan, a large part of the payment is assigned to interest. Over time, the total amount of interest from the loan is repaid and the amount paid from the main increase.
There are several different types of amortization that use the amortization plan. Some examples are a straight line, declining balance, annuity or negative amortization. ASULTIZATION is very similar to depreciation, simply inverse. Plan amortizaCE is the first payment made to one period from the day the loan was granted. It can be a year later or a month later. The last loan payment is usually smaller than other payments.