What Is a Loan Amortisation Schedule and How Does It Work?
- Projectify Team
- 7 days ago
- 4 min read
A loan amortisation schedule is a detailed table showing how a loan is repaid over time. For every repayment period, it normally shows:
Opening loan balance
Total repayment
Interest charged
Principal repaid
Additional prepayments
Closing loan balance
The schedule helps borrowers understand how much of each payment goes towards interest and how much reduces the principal. It can be useful for personal loans, mortgages, business loans, equipment finance and other forms of amortising debt.
What Does Amortisation Mean?
In lending, amortisation refers to the gradual repayment of a loan through scheduled payments. Each repayment normally includes:
Interest charged on the outstanding balance
Principal repayment that reduces the debt
By the end of the loan term, the outstanding balance should reduce to zero, subject to rounding, balloon payments or other contractual terms.
Why is More Interest Paid at the Beginning?
Interest is usually calculated on the outstanding loan balance. At the start of the loan, the balance is at its highest. This means the interest charge is also relatively high.
As principal is repaid, the outstanding balance falls. The interest charged during later periods therefore becomes lower.
For a standard fixed-payment amortising loan:
The total repayment may remain broadly constant
The interest element decreases over time
The principal element increases over time
What Information Appears in an Amortisation Schedule?
Period - This identifies the repayment number or repayment date.
Opening balance - The opening balance is the amount outstanding at the start of the repayment period.
Repayment - This is the total contractual payment made during the period.
Interest - The interest charge is calculated based on the outstanding balance and applicable periodic interest rate.
Principal - The principal component is the part of the repayment that reduces the loan balance. In simplified terms:
Principal repayment = Total repayment − InterestPrepayment - This records any additional payment made towards the principal outside the normal repayment.
Closing balance - The closing balance is the amount still owed after the period’s principal repayment and any prepayment. In simplified terms:
Closing balance = Opening balance − Principal repayment − PrepaymentCalculation Example
Loan Assumptions:
Loan amount: £100,000
Annual interest rate: 4.75%
Loan term: 5
Repayment frequency: Quarterly
Loan start date: 01 Jan 2027
Loan Metrics:
Periodic repayment: £6,192
Total interest: £11,450
Total repayments: £111,450
Final repayment date: 01 Jul 2031
Amortisation Schedule:
Date | Opening balance | Repayment | Interest | Principal | Closing balance |
1 Apr 2027 | £100,000.00 | £6,191.66 | £1,166.92 | £5,024.74 | £94,975.26 |
1 Jul 2027 | £94,975.26 | £6,191.66 | £1,108.28 | £5,083.38 | £89,891.88 |
1 Oct 2027 | £89,891.88 | £6,191.66 | £1,048.96 | £5,142.70 | £84,749.19 |
1 Jan 2028 | £84,749.19 | £6,191.66 | £988.95 | £5,202.71 | £79,546.48 |
1 Apr 2028 | £79,546.48 | £6,191.66 | £928.24 | £5,263.42 | £74,283.06 |
1 Apr 2029 | £58,121.42 | £6,191.66 | £678.23 | £5,513.43 | £52,607.99 |
1 Jan 2030 | £41,387.37 | £6,191.66 | £482.96 | £5,708.70 | £35,678.67 |
1 Oct 2030 | £24,060.64 | £6,191.66 | £280.77 | £5,910.89 | £18,149.75 |
1 Apr 2031 | £12,169.88 | £6,191.66 | £142.01 | £6,049.64 | £6,120.24 |
1 Jul 2031 | £6,120.24 | £6,191.66 | £71.42 | £6,120.24 | £0.00 |
Key Loan Criteria that Affect the Schedule?
Interest Rate
A higher interest rate increases the interest charged during each period.
This generally results in:
A higher periodic repayment
A greater total interest cost
A slower reduction in principal during the early periods
Where the loan has a variable rate, the repayment or loan term may change when the rate is reset. Interest sensitivity analysis can help show how repayments may change if the annual rate increases or decreases.
Loan Term
A longer term normally creates:
Lower periodic repayments
Slower principal repayment
Higher total interest
Debt remaining outstanding for longer
A shorter term normally creates:
Higher periodic repayments
Faster principal repayment
Lower total interest
Earlier loan maturity
Repayment Frequency
The repayment frequency changes the number and timing of payments. A monthly loan has 12 scheduled repayments per year, while a quarterly loan has four. The calculation should use an interest rate that is consistent with the repayment frequency.
Loan Calculator Pro supports several repayment frequencies and calculates the corresponding repayment schedule automatically.
What is the Difference Between an Amortising loan and an Interest-Only Loan?
Amortising loan
Each repayment includes both principal and interest. The balance gradually reduces over the term.
Interest-only loan
During the interest-only period, the borrower pays interest without reducing principal.
At the end of the interest-only period, the borrower may:
Begin amortising the loan
Refinance the balance
Make a large balloon payment
Repay the principal from an asset sale or other funding source
Interest-only loans may create lower initial repayments but can result in a large outstanding balance later.
Why do Businesses use Loan Amortisation Schedules?
Businesses use loan schedules for several purposes.
Cash flow forecasting - The schedule shows when principal and interest payments are expected to occur.
Financial reporting - Interest may be recorded as a finance expense, while principal repayments reduce the loan liability.
Business planning - The schedule helps assess future debt service and funding requirements.
Covenant analysis - The loan repayment profile may affect debt ratios and debt-service coverage.
Financing comparisons - Different loan offers can be compared based on repayment profile, interest cost and outstanding balance.
Why Can Lender Calculations Differ?
A calculator result may differ slightly from a lender’s repayment schedule due to:
Day-count conventions
Daily versus monthly interest calculations
Rounding
Payment timing
Compounding methodology
Leap years
Irregular first or final periods
Fees added to the loan
Variable interest rates
Lender-specific contractual terms
A calculator should therefore be used as an analytical and planning tool rather than a substitute for the lender’s official repayment statement.
Use Loan Calculator Pro
Loan Calculator Pro generates a detailed amortisation schedule and presents the results in a clear, structured format which canalso be exported to PDF or CSV.
Users can review:
Repayments by period
Interest and principal
Opening and closing balances
Prepayment effects
Annual loan summaries
Interest-rate sensitivities
Total financing costs
Generate a loan amortisation schedule here:
Disclaimer Loan calculations may vary from lender schedules due to rounding, interest conventions, fees and contractual terms. Loan Calculator Pro is intended for general planning and illustrative purposes only and does not constitute financial, investment, accounting, legal or tax advice.
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