Simple Loan Amortization Schedule Excel

A loan amortization schedule is a crucial tool for managing debt. It helps you understand how your loan payments are allocated between interest and principal, and tracks the remaining balance over time. In Excel, you can easily create an amortization schedule to visualize your loan repayment process. This guide will walk you through creating a basic loan amortization schedule using Excel, complete with formulas and step-by-step instructions.

1. Understanding Loan Amortization
Loan amortization refers to the process of paying off a loan through regular payments over a specified period. Each payment consists of both interest and principal. The amortization schedule breaks down these payments and shows how much of each payment goes toward interest and how much goes toward reducing the principal balance. This helps you see how your debt decreases over time.

2. Setting Up Your Excel Worksheet
To create an amortization schedule in Excel, follow these steps:

a. Open a New Workbook
Start by opening Excel and creating a new blank workbook.

b. Enter Basic Loan Information
In the first few rows of your worksheet, enter the following loan details:

• Loan Amount (Principal)
• Annual Interest Rate
• Loan Term (in years)
• Number of Payments per Year

c. Define Payment Periods
Label the columns for the amortization schedule. Typically, you'll need the following columns:

• Payment Number
• Payment Date
• Beginning Balance
• Payment
• Principal Payment
• Interest Payment
• Ending Balance

3. Input Formulas
Here’s how to input the necessary formulas:

a. Calculate Monthly Payment
Use the PMT function to calculate the monthly payment amount. In a cell, input:

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=PMT(Annual Interest Rate / Number of Payments per Year, Loan Term * Number of Payments per Year, -Loan Amount)

For example, if the annual interest rate is 5%, the loan term is 15 years, and the loan amount is $200,000, the formula will look like:

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=PMT(5% / 12, 15 * 12, -200000)

This formula gives you the amount of each monthly payment.

b. Fill in Payment Numbers
In the Payment Number column, start with 1 and drag the fill handle down to create a sequence for all payments.

c. Calculate Payment Dates
For the Payment Date column, start with the loan start date and use the EDATE function to increment dates by one period each time. For example:

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=EDATE(Start Date, Payment Number - 1)

d. Calculate Beginning Balance
For the Beginning Balance of each period, use the ending balance of the previous period. For the first period, it is the loan amount.

e. Calculate Interest Payment
To find the interest portion of each payment, use:

sql
=Beginning Balance * (Annual Interest Rate / Number of Payments per Year)

f. Calculate Principal Payment
Subtract the interest payment from the total payment to get the principal payment:

=Payment - Interest Payment

g. Calculate Ending Balance
Subtract the principal payment from the beginning balance:

=Beginning Balance - Principal Payment

4. Fill Down Formulas
After setting up the formulas for the first row, drag the fill handle down to apply these formulas to all rows in the schedule.

5. Formatting Your Schedule
Format your schedule for better readability. Adjust column widths, apply borders, and use bold text for headers. You can also use conditional formatting to highlight certain cells, such as the remaining balance when it reaches zero.

6. Example Amortization Schedule
Here's a sample amortization schedule for a $200,000 loan at 5% interest over 15 years with monthly payments:

Payment Number	Payment Date	Beginning Balance	Payment	Principal Payment	Interest Payment	Ending Balance
1	01/01/2024	$200,000.00	$1,576.00	$1,130.64	$445.36	$198,869.36
2	02/01/2024	$198,869.36	$1,576.00	$1,133.46	$442.54	$197,735.90
...	...	...	...	...	...	...
180	12/01/2038	$1,576.00	$1,576.00	$1,576.00	$0.00	$0.00

7. Final Adjustments
Ensure all calculations are accurate and the schedule correctly reflects the loan details. Make any necessary adjustments to formulas or formatting.

Creating a loan amortization schedule in Excel is a valuable skill for anyone managing loans. It provides clear insights into how each payment impacts the balance and helps in financial planning. By following the steps outlined above, you can easily set up your own amortization schedule and track your loan payments efficiently.