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Loan Amortization Spreadsheets

Regardless of whether you own a business or you are looking for items for your own personal use, the reality is that often times buying certain high-ticket items require financing. When you involve yourself or your business in financing it is largely important to approach such transactions with foresight. The utilization of a Loan Amortization Spreadsheet can aid in making sound financial decisions especially when borrowing money.

For an individual a Spreadsheet can offer guidance in terms of getting the best and most financially sound loan possible. Whether it is a car, a house, education loans, or whatever else, understanding how the payments work, how extra payments affect the life of the loan or how a varying interest rate influences your monthly payment, a Spreadsheet can offer a great many answers to a great many questions.

For a business, a Loan Amortization Spreadsheet offers a wide array of usages. The need for most business to avoid large sums of credit debt is paramount, especially for smaller businesses. Therefore, using a Spreadsheet can offer businesses the opportunity to access their current position in a particular loan. Allowing them to weigh, the advantages and disadvantages of paying off a loan early or simply when becoming proactive in paying extra is not a smart financial decision.

For a business, another plus to is its fluidity. Unless you are fortunate enough to own a business that deals in cash only, you will more than likely run into balloon payments, varying interest rates and many other constantly changing financial details. With a Spreadsheet, all these numbers can change to fit your situation. If you need to account for an interest rate that has lowered or an interest rate that unfortunately risen, a Loan Amortization Spreadsheet can offer the up to date information needed at the highest level of business. Also, for businesses a Loan Amortization Spreadsheet can offer itself up as not only just cold hard numbers on a page but a Loan Amortization Spreadsheet can also be presented as a color gap graph or a point chart. The same cannot be said about an amortization schedule.

So whether you are an individual looking for the best deal you can get or you’re a business looking to optimize your bottom line, the benefits of a Loan Amortization Spreadsheet are difficult to argue and hard not to see.

By: Amit Raju

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Posted in Finance · November 24th, 2007 · Comments (0)

Basics of Loan Amortization Tables

One of the most important and costly investments people make in their life times is the purchase of a home. The decision to take out a home mortgage is a huge one; and it’s extremely important that people figure out which type of mortgage is the best type for their unique situation, and make sure they have calculated the amount of mortgage they can actually afford. It’s necessary also, to fully understand the rate of interest that you are paying and how it is calculated, as it will affect the amount of money you are borrowing immensely. There are a number of ways that interest rates are calculated, but most banks calculate the interest according to what is known as a loan amortization table.

Amortization is a fancy word that basically describes the number of years it will take to repay the loan completely, with interest.

There are three types of loan amortization tables that are used most frequently, including:

o Equal Capital – In this type of amortization table, the calculation system will display each of the equal monthly payments as well as the total variable payment that is made to the bank. The amount of the repayments decrease as the term of the loan gets closer to the expiration date.

o Spitzer Amortization Table – In this type of amortization table, the repayments are often considered the most optimal. A Spitzer loan provides a fixed monthly payment, even with a variable rate of interest that may adjust throughout the repayment period. Unfortunately, however, many people mistakenly believe that most of the interest is paid within the first year of making repayments on this loan, but that is not the case.

o Bolit Amortization Table – In this type of amortization table, the payments that are made pay the interest on the loan, and the principal amount of the loan is only paid after a specified period of time. So the beginning payments are interest only.

As with any investment tool, there are numerous risks associated with loan amortization tables, including:

o Linking risk

o Rising consumer price index

o Rising prime risk

o Exchange rate

o Fluctuating interest rate risk

If you are able to define the type of risk involved with the various amortization tables, then you can have a better understanding of how to best neutralize the risk.

By: Bart Rutherford

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Posted in Finance · November 7th, 2007 · Comments (0)

Loan Calculation – Building An Amortization Table in Excel

Knowing how to build an amortization table will give you a good handle on your monthly payment for a loan and how much you will pay in interest over the course of your loan.

I use amortization tables a lot in both business and in my personal life. For business, I usually use it to determine a monthly payment or determine the actual interest rate of a loan. Often, a loan will include a monthly processing fee or a service fee upfront – really just another form of interest, but if you are comparing two loans, you need to know what your true cost of capital is.

In personal use, I use an amortization table to determine what my mortgage interest is for the purposes of calculating my estimated taxes. I also use it for determining what the payment will be on a car loan based on different loan terms, for instance.

Information you need:
Loan amount (example: $200,000) Interest rate (example: 6%) Loan term in months (for this example, we are saying 36 months)
Open Excel, in cell A-1, type ‘Interest.’ In cell B-1, type your annual interest rate. In cell A-2, type ‘Term’, in B-2, type ‘Payment’, in C-2, type ‘Interest’, in D-2, type ‘Principal’, in E-2, type ‘Outstanding’. In cell E-3, type your total loan amount. In cell A-4, type ‘1′. In cell A-5, type ‘=A4+1′. Copy and paste into cells in the A column below A-5 until you get A-39 (or so that the number in the last cell equals the number of months of your loan). In cell B-4, type a reasonable number for your payment, 1,000 for every $100,000 in borrowed money will work fine. In cell C-4, type “=E3*$B$1/12″. In cell D-4, type “=B4-C4″. In cell E-4, type “=E3-D4″. In cell B-5, type “=B4″. Copy cells C-4 through E-4 into cells C-5 through E-5. Copy cells B-5 through E-5, and paste them in every row from row 6 to the row 39. Select cell E-39. Select ‘Goal Seek…” from the Tools menu. In ‘Set cell:’, it should say ‘E39′. In ‘To value:’, type in ‘0′. In ‘By changing cell:’, type ‘B4′. Hit OK.

This will give you the exact payment and monthly interest and principal payments for your loan.

Remember if you change the term of your loan, the places where I have put ‘E39′ will have to be changed to the row where your last term month is.

Here is a sample amortization file. This is a very useful tool because it is simple, but not many people really know how to do this.

By: C. Worrall

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Posted in Computers And Technology · November 6th, 2007 · Comments (0)

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