When you take out any loan, especially a mortgage, it is important to understand all the fees and interest costs associated with that loan so that you can better prepare for paying the loan back. Amortization is a term used in the banking and loan industries to describe the period of time in which the loan is repaid. For example, if you take out a mortgage for 25 years on a new home, the amortization period is 25 years. When you make a payment on your mortgage, a portion of the payment goes to the principal (the initial loan you received) and the interest (how much it is costing you to borrow the money).
Amortization can impact lending in two ways: the first way is that it can help reduce the cost of repayment on a month-to-month and year-to-year basis for an individual or a company, where equipment or property is concerned. However, individuals and businesses should be aware that the longer they amortize a loan, the more interest they could end up paying. While a shorter amortization period would mean higher monthly payments, it could also mean less interest is paid out over time.
When it comes to signing a loan, understanding how amortization impacts your bottom line is important. Where business is concerned, the amortization and depreciation needs to be calculated into your income statements and year-end statements on a regular basis. Looking at an amortization schedule and using the calculator below will help you see what loan payments will look like based on interest rate, length of the loan, and amount. By adjusting the numbers for each field, you can find a loan payment that works for you and your business. The same amortization schedule applies to personal loans, so if you need help determining cost over the life of a loan, and for budgeting purposes, the calculator below can help.
Enter the loan amount, interest rate, term, and click calculate to view a payment breakdown for the duration of your loan.
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Disclaimer: The calculated results shown above are based on ordinary annuity calculations. Calculations completed within this tool are estimates and are not guaranteed to be accurate