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# How to make an amortization table

## Instructions

Gather your variables: let "M" be the monthly payment; designate "r" as monthly interest; use "P" for principle; and let "n" be the number of years it'll take to pay the loan. Place these numbers into a formula: M = Pr(1+r)^n divided by [(1+r)^n-1].

Create your amortization table, label the top columns from left to right as follows: Name the first column as, "payment," the second column as "Amount," the third column as "Interest Paid," the fourth column as "Principle Paid," and the fifth column as "balance." See Tips below. Skip a space before you vertically label the "payment" column. Label the second space down as "1," then label the next space down as "2," and so on until your final payment. If you're making 25 payments, for example, label this column from 1 to 25.

Start putting numbers in the amortization table. Place the total balance to be paid in the space immediately under the label "balance" in the "balance" column. Take

your principle loan, monthly interest rate, the number of years you're expected to make your payments, and plug them into the formula in Step 1. Calculate what you're going to pay on a monthly basis.

Place the amount you computed in Step 3 in the next column over, "amount." Know that this number will be right next to the number "1" under the amortization table's "payment" column. Compute interest based on your current balance, and place this result in the next column over, the "interest" column.

Subtract your interest amount from your monthly payment amount to get your "principle paid." Place the result under the "principle" column. Subtract the amount you'll pay that first month from the previous balance to get the current balance for the next month. Place the new balance under the Amortization table's "balance" column, then repeat this process for the next row representing payment number 2. Repeat Steps 3 to 5 until you complete the final loan payment line on the bottom of the amortization table.

Source: ehow.com
Category: Bank