Loan amortization schedule: what it is and how to read it
Learn what each amortization-schedule column means and how a fixed payment changes as the outstanding balance falls.
An amortization schedule shows more than the payment. It identifies how much goes to interest, how much reduces principal and what balance remains after each period.
What each column means
| Column | Meaning |
|---|---|
| Payment number | Position in the loan term |
| Payment | Amount due for the period |
| Principal | Portion that reduces the debt |
| Interest | Financing cost for the period |
| Insurance | Separate recurring charge, if any |
| Outstanding balance | Debt remaining after the payment |
In a standard fixed-payment loan, interest is calculated from the outstanding balance. The early balance is high, so early payments contain more interest. As principal falls, interest falls and more of the fixed payment goes to principal.
Six-month example
For $50,000 at 24% over 24 months, the estimated base payment is $2,643.55:
| Month | Payment | Principal | Interest | Outstanding balance |
|---|---|---|---|---|
| 1 | $2,643.55 | $1,643.55 | $1,000.00 | $48,356.45 |
| 2 | $2,643.55 | $1,676.43 | $967.13 | $46,680.02 |
| 3 | $2,643.55 | $1,709.95 | $933.60 | $44,970.06 |
| 4 | $2,643.55 | $1,744.15 | $899.40 | $43,225.91 |
| 5 | $2,643.55 | $1,779.04 | $864.52 | $41,446.87 |
| 6 | $2,643.55 | $1,814.62 | $828.94 | $39,632.26 |
The payment stays level while its composition changes. First-month interest is:
50000 x 0.02 = 1000Second-month interest is lower because the balance has already fallen to $48,356.45.
How to use the schedule
A schedule helps compare terms, total interest, balance after a chosen date and the effect of extra payments. Keep insurance and fees visible as separate costs so they are not confused with interest.
When evaluating a formal offer, compare the institution’s schedule with the stated rate, payment frequency, fees, insurance and—in Mexico—the official CAT.
Generate a complete schedule with the loan calculator, including optional monthly insurance and extra principal. To build it manually, see the Excel amortization guide. The French amortization article explains why the mix changes.
Frequently asked questions
What is an outstanding balance?
It is the unpaid principal after a payment. Periodic interest is commonly calculated from this amount.
Why does interest decline each month?
With a fixed rate, a smaller outstanding balance produces less interest.
Can I request a schedule before signing?
You should ask the lender for a formal payment schedule or simulation and verify that it matches the offer’s terms.