Amortization Formula

Having this kind of chart is important because it helps you understand and manage your financial situation. This chart also helps you determine the amount of your monthly debt payment at a given interest rate as well as the amount of money that will be used in paying off the principal against the interests.

Creating an amortization chart is very easy with Microsoft Excel. However, before creating the chart, make your promissory note ready as data reference to be entered on the spreadsheet. The promissory note contains the repayment period, interest rate, and the amount of debt that you owed from the agency that granted you the loan. It is usually provided by the agency to you as proof of your existing loan to them.

On the spreadsheet, create five columns for fields of Ending Balance, Principal, Interest, Payment, and Beginning Balance. Using the formula of the Excel, compute the monthly payment on the cell under the column field of Payment. Afterwards, multiply the monthly interest rate by beginning with the balance amount reflected under the column of Beginning Balance. This computation will show you the amount used interests for your monthly payment.

An amortization chart can show you the amount of payment made every month and how this payment will go towards with interests and principal throughout the entire duration of the loan period. Initially, a huge portion of the monthly loan payment is allotted for interests because most loans get the interest payment from the first portion of the loan period. As the payment continues, some portion of the payments made will be allotted to the principal.