Amortization Schedule

Loan Amortization Schedule

How Smart Borrowers Use A Loan Amortization Schedule

There's an interesting angle about simple interest loans that smart borrowers use to their advantage. Most borrowers, on the other hand, don't understand this technique and pay a lot more for their loans. However, the simple fact the loan amortization schedule borrowers receive when they close the deal is not set in stone, makes all the difference. This means you can lessen your interest charges, the number of payments, and the term of the loan. Simple interest means just that. There are no penalties involved for paying more.

A loan amortization schedule is nothing more than an outline of how loan repayment works. Homebuyers know it as a mortgage amortization schedule, but you will also find a similar document when you apply for a car loan, or a commercial loan. The schedule is not a legal document but shows how much money from each payment will go toward reducing the principal and interest payments. A comprehensive schedule will show every single payment required to meet your loan obligations and how the lender assigns them. It also shows the total interest you will pay over the life of the loan. This is the figure that smart borrowers use to save big money on their loans.

To see just how you can use your monthly amortization schedule to your advantage, you would need an amortization calculator or a chart program. You can find both of these on the Internet. . You would find some of the tools advanced enough to show the impact extra payments can have on a loan over time. Begin the exercise by finding your loan principal amount, the applicable interest rate, and the monthly payment amount. Just up that monthly payment amount by a small amount to see the difference that can take place. Sometimes, even $50 extra a month can work a loan to your advantage. Even a small amount can knock years off the term of a loan and even much interest charges, as well.

The advantage of going with an extra principal payment or extra payment amount worked in with the monthly payments will become obvious quickly. The reason to go this way rather than writing the loan for a shorter term or a greater payment is to give borrower's a breathing room. A $500 payment, for example, might be easy to swing. It might also be possible to make a $600 payment instead most of the time. When something happens, however, that extra $100 doesn't have to go on the loan. To work a loan amortization schedule to one's advantage doesn't take much when you consider a simple interest loan. Just a few extra dollars on top of your regular payments can make a big difference in the total cost of your loan.

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