Try It
Let's practice using a template to see how it works. Follow the steps below to see the development of a loan over a period of 3 years with the provided information. Then change the values to watch the amortization schedule perform the calculations for you.
Finding the Template
First you need to open the amortization loan schedule template.
If you're using Microsoft Excel:
- Open Excel
- Go to File » New
- Type "Loan Amortization Schedule" into the 'Search for online templates' search box.
- Double click to download.
- Or, download the Loan Amortization Schedule template from Office.com
If you're using Google Sheets:
- Open the Loan Amortization Schedule template.
- This is a "View Only" template, so you will need to either:
- Select File >> Make a Copy. Save a copy of this template in your My Drive.
- Select File >> Download. Download an .xlsx version of this file. Navigate to your My Drive, upload the .xlsx file, and then edit it using Google Sheets.
Using the Template
Now that you have your template downloaded, let's add some information!
- Enter the following numbers in the top of your template. In Microsoft Excel, it's in the top left area titled "ENTER VALUES". In Google Sheets, it's in the top left area titled "INPUTS". Again, you will only be entering in the specified numbers (no words).
- Loan amount = $10,000
- Annual Interest Rate = 8%
- Loan Period in Years = 3
- Number of Payments per Year = 12
- Start Date of Loan = 4/1/2020
- As you enter in each value, observe the changes in the numbers on the screen.
- Enter some other values of your choice to see how your loan is affected.
Reflection Questions:
- Are you surprised at how much the montly payment is? Does it vary or stay the same, month to month?
- How much of each payment goes to interest (rather than the original loan amount, which is called the principal)?
- What happens to the numbers in the 'Principal' / 'Principal Paid' column throughout the life of the loan?
- What happens to the numbers in the 'Interest' / 'Interest Paid' column throughout the life of the loan?