What is an amortization schedule?

An amortization schedule is a table that outlines each payment on a loan over time, showing how much of each payment goes toward the principal and how much is allocated for interest. This schedule helps borrowers understand the structure of their loan repayment, detailing the totals for each payment period, the remaining balance after each payment, and the cumulative interest paid over the life of the loan.

By providing a clear view of the payment process, it allows borrowers to see how the loan amount decreases gradually and how interest payments decrease over time as the principal balance is paid down. Understanding an amortization schedule is crucial for borrowers as it aids in financial planning and helps them anticipate when their loan will be paid off completely.

While other options may involve financial calculations or assessments related to mortgage lending, they do not accurately describe the specific function of an amortization schedule, which is focused solely on detailing loan payments over time.