What Do You Mean By Loan Amortization?
Loan Amortization is paying off a debt, (principal and interest) over time, in equal installments. The most common example of loan amortization are home loans, auto loans, and personal loans from a bank for small projects. There is an inverse relationship between the principal and interest over the life of the amortized loan. Since the calculation of interest amount is based on the latest loan balance, the interest amount decreases as loan payments are made and the principal part of the payment increases.
What is a Loan Amortization Calculator?
The loan amortization calculator helps borrowers to determine how much of his or her monthly payment will go toward the interest and how much will go toward the principal (the money you borrowed).
The calculator shows:
- How much of the total amount (principal and interest) has been paid to date
- How much principal and interest of each payment includes
- How much of the principal is owed at a specified date
What is Accelerated Amortization?
Accelerated Amortization means making extra payments towards a mortgage principal to pay off a mortgage loan balance before the specified loan settlement date. What is the benefit of paying extra? The benefit of making these payments is the reduction of your interest payments.
A mortgage loan is $200,000 at 7% interest for 30 years.
$1330.60 is the monthly payment for the principal and interest.
Should you decide to increase your payment by $100 each month, your loan payoff period will be reduced to 24 years instead of the 30 years. This will save you six years of interest payments! Therefore, if you can afford to pay more, paying your mortgage in an accelerated manner diminishes the amount of additional interest that you were originally required to pay on the loan.
Need Assistance Regarding Your Mortgage Payments?
Our goal at United Financial is to offer education and assistance to everyone. We want you to understand your mortgage and debt. Are you ready to meet your financial goals and commitments on time?
Other services we provide:
- Budget & Financial Freedom Counseling
- Foreclosure Prevention Counseling
- Home-buyer Education Programs
- Pre & Post Bankruptcy Counseling
- Credit Counseling
- Financial Education classes for businesses and schools