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Title: Amortization Spreadsheets - Their Use Reveals the Secret to
Cutting Interest Costs
Author: Ed Lathrop
Article:
Many times the interest portion of a mortgage, or other loan
payment goes unnoticed. By using amortization spreadsheets you
can easily see how much interest is being paid with each monthly
payment. Also, you can see how much interest the payments are
accumulating through the months and years.
Typically, an amortization spreadsheet will have five columns.
The first will simply show the number of the month, the second
will show interest paid that month, the third will show
principal paid that month. Then, the forth column will show how
much interest has been paid up until this payment and the fifth
column will show how much principal has been paid altogether
until the time of that corresponding payment.
Interest Vs. Principal
In the early going, the interest portion of each payment will be
much larger than the principal portion. It is interesting to
note that when an extra principal payment is made, it saves the
payer from paying the interest on the corresponding payment. In
other words, if a principal payment due on a particular payment
is $100 and the interest due is $1,000, the person paying the
mortgage can save $1,000 simply by paying the $100 before the
payment is due.
Amortization Schedules or Spreadsheets
There are different formats, other than an amortization
spreadsheet, which show how a loan is amortized. These different
formats are: . Amortization tables . Amortization schedules .
Amortization charts
They are all the same. In the case of amortization, charts,
schedules and tables are all different words meaning the same
thing.
Amortization spreadsheets are a little bit different. Typically,
they are saved as an XLS file. Most times they are constructed
using Microsoft Excel. Using this format the user has to use
proper formulas in certain cells to build the spreadsheet.
Which Format is the Best One?
The advantage to a spreadsheet over a schedule is that in the
spreadsheet, a different amount of principal paid can be entered
in a "principal paid" cell and this entry will change the
remainder of the spreadsheet. This is advantageous because you
can see how much the remainder of a payment schedule will be
altered by changing just one particular payment.
Amortization charts, schedules, and tables are static. Once they
are printed out they are done. The advantage to them is they are
made with either a computer program or an online Website. Since
they are constructed in this manner almost instantaneously. They
require no effort on the user's part. The user can simply print
out and study it and see how much money he can save in interest
by paying different corresponding principal payments.
The Significance of Amortization
In any event, seeing how a loan amortizes is very revealing.
Once a person finds he or she can cut the wasted cost of
interest greatly, he or she has learned a very important step to
wealth building.
In general, paying down high interest debt is the very first
step in turning around a budget of a struggling household. High
interest debt of course, includes credit cards, and as anyone
can easily see by studying amortization, the early payments on a
mortgage.
However, until a borrower prints out an amortization table,
schedule or chart, or builds an amortization spreadsheet for a
particular mortgage or loan, he or she is inclined to go on
wasting money unnecessarily on interest.
About the author:
Author Ed Lathrop has developed a Website that let's you print
out your own amortization table at:<a
href="http://freeamortizationschedule.net"> Amortization
Schedules Free</a>. And, Ez Calculator includes a "Pay Credit
Card Debt Quick" calculator at:<a
href="http://ezcalculator.com"> Free Financial Calculator</a>
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