Are you paying off your Personal Loan? Great. This is the best time for you to go through the following section on paying off your dues. You can learn all about Amortization Schedule and how it helps in paying off loans.

Amortization Schedule Definition

In finance and business, Amortization refers to the process of clearing one’s dues or loans. Overtime, the principal amount decreases as you make the payment.

Amortization Schedule is a table which lists out each periodic payment you make. Over time, the interest and principal decrease. In the end, the list highlights your total interest and each principal payment for the loan period.

The bit of amount that goes towards paying the interest lessens as you make a payment.

Methods of Amortization

Several methods are adopted to create an amortization schedule. This includes the straight line, annuity, declining balance, negative amortization or increasing balance and bullet.

Amortization schedules run in an order of sequence. The first payment occurs one full payment period after the loan was taken. The last payment indicates the balance of the Personal Loan and usually differs from the previous amounts.

Did you know?

An amortization table shows total interest you have paid till date. It also shows the remaining principal balance on each payment date.

Need for Amortization

With help of an Amortization schedule, you will be able to spread out your costs over a period of time. You can amortize items like loans, mortgages and even annual subscriptions. When you apply for Personal Loan, you would want to even out the expenses throughout the year. This will help you manage your finances better and prevent unnecessary spending.

For instance, you have borrowed Rs.1,00,000 from a lender such as Bajaj Finserv. If you repay Rs.5000 of the original amount every year, then Rs. 5000 of your loan has amortized.

Importance of Amortization

The duration or length of time over which intangible assets are repaid vary from 10 years to even 40 years. Any asset must be amortized within its shelf life. If it is a bond or a loan, it must be repaid within the maturity period. You can make use of Personal Loan EMI Schedule tools that are available online. The best part is that a lot of these tools are completely free.

Type in the loan amount, total number of installments and current rate of interest charged. This easy reckoner will help you clear your Personal Loan on time, while you manage expenses like a professional.

Money Matters

check the online personal loan EMI calculator. With few details like your loan amount, interest charged and tenor, you can find out your monthly installment, and how much you’ll need to set aside to make your payments from your salary.

As it can be seen from the Amortization Schedule definition, this table is an essential tool for every homemaker and professional. All your payments are made on time. The Personal Loan EMI schedule is an added boon which helps you make the right informed decisions when it comes to finances. If you can follow this schedule to make and track your payments, you’ll be able to manage your finances a lot more efficiently than you did before. This can be a lifesaver to a lot of people who are struggling with their loan payments.

Author's Bio: 

I am a Financial Advisor with an experience of more than 7 years.I had worked for top Financial Firms in India and has been a visiting faculty at many reputed institutes.

I have done my post-graduate in Business Economics, from Princeton University, USA. During my free time, i teaches children from marginalised sections of society and also work on my Blog.