Loan Amortization with Microsoft Excel
In this tutorial we will see how to create an amortization schedule for a fixed-rate loan using Microsoft Excel and other spreadsheets. Almost all of this tutorial also applies to virtually all other spreadsheet programs such as Open Office Calc and Google Docs & Spreadsheets. Spreadsheets have many advantages over financial calculators for this purpose, including flexibility, ease of use, and formatting capabilities.
You can download the example spreadsheet or follow the example and create your own.
Fully amortizing loans are quite common. Examples include home mortgages, car loans, etc. Typically, but not always, a fully amortizing loan is one that calls for equal payments (annuity) throughout the life of the loan. The loan balance is fully retired after the last payment is made. Each payment in this type of loan consists of interest and principal payments. It is the presence of the principal payment that slowly reduces the loan balance, eventually to $0.
An amortization schedule is a table that shows each loan payment and a breakdown of the amount of interest and principal. Typically, it will also show the remaining balance after each payment has been made.