Amortization calculator is a useful financial tool

Amortization calculator, also known as amortization schedule calculator

, is an extremely useful device. It works as a loan calculator which helps you calculate the repayment of your loan on a monthly basis. The unique feature of this calculator is that it lets you find out how much of your repaid amount will go into the principal and how much of it will go as interest. It is based on the amortization process.

The way of calculation is quite easy: you have to feed the loan amount, the interest rate, loan term and the repayment date. Then hit the 'calculate' button. And your calculation has been done for you at the blink of an eye! There will be varying amounts of the principal and the interest into every instalment but interestingly, the total figure of each payment will remain unaltered. The interest rate is varied in order to check the difference a better rate might bring about in the kind of car or home one can afford to buy.

It can also serve as means of showing the prospective buyer necessary information about the loan, through which he or she can save more time, money and labour and therefore, invest more money, facilitating more flow of money/credit into the market.

An amortization schedule essentially consists of a table having loan details at the beginning of which will be shown the amount borrowed, followed by the period of scheduled payments. Any kind of tax or insurance made by the lender is shown there as well. The table will then flash each payment to be made along with the sum that goes towards the principal being subtracted from the loan each time. The chart will now reflect the new balance after each payment. Out of each individual payment how much dollar goes towards principal and how much is allotted towards the interest, can also be revealed in exact proportions by this calculator.

An amortization calculator is put into use in accounting, for analysing debts like short-term loans, credit cards and student loans but is mainly used for mortgage-related issues. But there is also a word of caution: it should be used to calculate and for the estimation of, repayments of loan only, because it excludes taxes or insurance.

Amortization calculator is a useful financial tool

By: Antonio Bristow

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