Rahul Verma was confused about the repayment of his existing used car loan. He had taken a used car loan two years back. The past few months were financially hard for him and he missed out on two of his equated monthly installments or EMIs. His lender asked him to get his amortization schedule online through the website and make necessary payments. Rahul was surprised at the ease with which he resolved the issue.

What is an Amortization Schedule?

Amortization schedule is the repayment schedule of your loan. It is a table which contains the repayment details of the loan. The components of the table are as follows:

  • The Month and Year

The schedule starts with the month and year from which the repayment starts. With each succeeding row, the month increases chronologically representing the month in which each EMI is paid. So, if the amortization schedule starts with January 2017, it shows the month and the year from which the repayment of the loan starts. The next row shows February 2017 and the progression continues till the loan repayment tenure is over.

  • The Opening Balance of the Loan

The next column shows the opening balance of the loan outstanding at the start of the month and year shown by the previous column.

  • The Principal Component of the EMI

The next column shows the amount of principal of the outstanding loan which is paid by your EMI.

  • The Interest Paid

This column shows how much is the interest paid through the EMI. The interest payable reduces every month when the EMI is paid and so the successive rows of this column show a reducing amount.

  • The EMI Payable

The principal column and the interest column together constitute the EMI payable for the loan. The EMI remains constant throughout the loan tenure.

  • The Closing Balance

The last column shows the closing balance of the loan. This balance shows the amount of loan outstanding after the end of the month in which the EMI is paid. This balance also reduces in every successive month as the loan is repaid.

How the Amortization Schedule Works?

The working of an amortization schedule is simple. The EMI remains the same throughout the tenure. Interest payments are higher in the initial part of the schedule as the outstanding loan is higher. As the EMIs are paid, the outstanding loan liability reduces thus reducing the interest payments. While the interest payments reduce towards the end of the schedule, the principal portion increases. The schedule, thus, shows the month on month change in the outstanding loan amount, the principal and interest paid and the closing balance of the loan after each EMI payment is done.

Does the Amortization Schedule Change?

Yes, the amortization schedule changes if there is any change in the amount of the EMI paid. If you pay a lower EMI or prepay the loan partially, the amortization schedule would be recalculated to reflect the changes. The outstanding balance would be recalculated and so would the principal and the interest.

What is the Importance of the Amortization Schedule?

The amortization schedule is important in the sense that it acts as a ready reckoner for your loan repayment details. You can instantly see the outstanding value of your loan, the principal and interest amount you are repaying in every EMI. You can also view the month in which the loan would be completely repaid. Thus, by calculating an amortization schedule you can easily understand your monthly outgoes towards loan repayments beforehand and also how the outgoes would affect your loan repayments.

Mr. Verma paid off the due EMIs and also made a partial prepayment towards his loan. He then made his amortization schedule and found out the revised EMIs payable by him. You can also get your used car loan and create a repayment schedule for the same. Alternatively, you can avail a Personal Loan for used car and get a Personal Loan amortization schedule.

For availing a Personal Loan, you can choose Bajaj Finserv and fill in the Personal Loan online application form.

Read Blog: All You Need to Know About Used Car Loans

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