Written byAn amortisation schedule is a table showing every repayment on a loan, splitting each one into interest and principal so you can see the balance fall.
Also known as: amortisation table, loan repayment schedule, amortization schedule
Key points
- The interest portion is largest at the start and shrinks with the balance, and on long loans it can outweigh principal early on.
- It is the standard output of amortisation: paying a debt down to zero in regular instalments over a set term.
- Each line shows the date, the payment, the interest and principal portions, and the balance still owing.
- A schedule assumes the rate and payment frequency hold, so extra payments or a rate change need a new one.
- A balloon payment leaves a lump sum outstanding at the end instead of a zero balance.
How an amortisation schedule works
Each period the lender works out interest on the balance still owing. That interest comes out of the payment first, and whatever is left over reduces the balance. Because the balance is smaller next period, less of the following payment goes to interest and more goes to knocking down the debt. On a fixed rate loan the payment itself never changes, but its make up shifts every month.
That shift is why the schedule matters. Halfway through a long term you can have paid a lot of interest while still owing more than half the original amount. Seeing the columns side by side shows what an extra payment or an early settlement would actually save you.
What the columns mean
A typical schedule runs one row per repayment across five columns: the period or date, the opening balance, the payment, the split into interest and principal, and the closing balance. Add the principal column down the page and it comes to the amount originally borrowed. Add the interest column and you have the total cost of the finance before fees.
Fees usually sit outside the table. Establishment fees, monthly account fees and early termination charges are set out in the contract rather than the schedule, so the schedule on its own understates what you pay. Read it next to the contract and the comparison rate for the full picture.
Where you will see one
Lenders will usually provide a schedule on request, and many issue one at quote stage and again at settlement, on home loans, car loans, personal loans and business equipment finance. Accountants work from the interest column to book the deductible portion of repayments, and from the principal column to track the liability sitting on the balance sheet.
Businesses use them to forecast. Knowing exactly what leaves the account each month, and how much will still be owing at any future date, makes cashflow planning and refinancing decisions much easier. Ask the lender for the schedule in writing rather than relying on an online calculator estimate.
Example
A courier finances a $30,000 van over five years with monthly repayments, so the schedule runs to sixty lines. On line one, a large slice of the payment is interest and the remainder comes off the balance. By line thirty the payment is identical but noticeably more of it is reducing the debt. On line sixty the interest portion is small and the closing balance is zero. When the courier asks what it would take to pay the van out after three years, the schedule answers it: the closing balance on line thirty six, plus any fees the contract charges for finishing early.
Not to be confused with
- Amortisation
- the process of paying a debt down over time, where the schedule is the table that maps it out
- Flat rate
- a way of quoting cost on the original amount, not the reducing balance a schedule tracks
Frequently asked questions
How does an amortisation schedule work?
It lists every repayment in order. For each one it calculates interest on the balance still owing, takes that from the payment, and applies the rest to the balance. The closing balance then becomes the opening balance for the next line, until it reaches zero.
How do I read an amortisation schedule?
Read across a row, not down a column. The row tells you what you pay that period, how much is interest, how much reduces the debt, and what is left owing afterwards. The closing balance column is the one to check if you are thinking about paying out early.
Why is so much of my early repayment interest?
Interest is charged on the balance outstanding, and at the start that balance is at its largest. As the balance falls, the interest charged each period falls with it, so more of the same payment goes to principal. The change is gradual, not sudden.
Do extra repayments change the schedule?
Yes, if the contract allows them. An extra payment reduces the balance sooner, so less interest accrues from that point and the loan finishes earlier. The old schedule no longer applies, so ask the lender for an updated one. Some fixed rate contracts limit extra payments or charge for them.
What is the difference between amortisation and depreciation?
Amortisation is about paying down a debt, or writing off an intangible asset, over time. Depreciation is about writing down the value of a physical asset such as a vehicle or machine. A loan has an amortisation schedule; the asset it paid for has a depreciation schedule.
Related terms
Broader term: Amortisation
Amortisation
Amortisation is the process of spreading a cost over time: repaying a loan in scheduled instalments of interest and principal, or expensing an intangible asset over its useful life.
Read definitionInterest
Interest is the price of using money: what a borrower pays on a loan, or a saver earns on a deposit, expressed as a percentage rate on the principal.
Read definitionPrincipal
Principal is the amount of money you originally borrowed or, on a running loan, the part of that sum you still owe, excluding interest, fees and charges.
Read definitionBalloon payment
A balloon payment is a lump sum, agreed upfront, that is paid at the end of a loan term and lowers the regular repayments by deferring part of the principal.
Read definitionEarly settlement
Early settlement is paying a loan or lease out in full before the end of its term using the lender's payout figure, or bringing a property settlement date forward.
Read definitionPayment frequency
Payment frequency is how often scheduled repayments fall due on a loan, typically weekly, fortnightly or monthly, which affects total interest, loan term and how repayments fit your cashflow.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.