It is the presence of the principal payment that slowly reduces the loan balance, eventually to $0. Each payment in this type of loan consists of interest and principal payments. The loan balance is fully retired after the last payment is made. Typically, but not always, a fully amortizing loan is one that calls for equal payments ( annuity) throughout the life of the loan. Examples include home mortgages, car loans, etc.
You can download the example spreadsheet or follow the example and create your own.įully amortizing loans are quite common. Spreadsheets have many advantages over financial calculators for this purpose, including flexibility, ease of use, and formatting capabilities. Almost all of this tutorial also applies to virtually all other spreadsheet programs such as Open Office Calc and Google Docs & Spreadsheets. In this tutorial we will see how to create an amortization schedule for a fixed-rate loan using Microsoft Excel and other spreadsheets (the next part shows how to handle extra principal payments and also includes a sample spreadsheet using this same example data). This is the first of a two-part tutorial on amortization schedules. Are you a student? Did you know that Amazon is offering 6 months of Amazon Prime - free two-day shipping, free movies, and other benefits - to students? Click here to learn more
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