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Amortization Schedule Calculator


In accounting, the amortization of intangible assets refers to distributing the cost of an intangible asset over time. You pay installments using a fixed amortization schedule throughout a designated period. And, you record the portions of the cost as amortization expenses in your books. Amortization reduces your taxable income throughout an asset’s lifespan. A company’s intangible assets are disclosed in the long-term asset section of its balance sheet, while amortization expenses are listed on the income statement, or P&L.


Items that are commonly amortized for the purpose of spreading costs include machinery, buildings, and equipment. From an accounting perspective, a sudden purchase of an expensive factory during a quarterly period can skew the financials, so its value is amortized over the expected life of the factory instead.

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Over time, that changes and more of the monthly payment is applied to the principal as the interest balance decreases. One notable difference between book and amortization is the treatment of goodwill that’s obtained as part of an asset acquisition. With the information laid out in an amortization table, it’s easy to evaluate different loan options. You can compare lenders, choose between a 15- or 30-year loan, or decide whether to refinance an existing loan. You can even calculate how much you’d save bypaying off debt early. With most loans, you’ll get to skip all of the remaining interest charges if you pay them off early. Regardless of whether you are referring to the amortization of a loan or of an intangible asset, it refers to the periodic lowering of the book value over a set period of time.

  • First, amortization is used in the process of paying off debt through regular principal and interest payments over time.
  • In general, amortization schedules are provided to borrowers by banks or other financial institutions when credit is extended so that borrowers understand the repayment structure.
  • Under the sum-of-the-years digits method, a company recognizes a heavier portion of depreciation expense during the earlier years of an asset’s life.
  • The total payment stays the same each month, while the portion going to principal increases and the portion going to interest decreases.
  • When a company acquires an asset, that asset may have a long useful life.
  • Amortization and depreciation are the two main methods of calculating the value of these assets, with the key difference between the two methods involving the type of asset being expensed.

In theory, more expense should be expensed during this time because newer assets are more efficient and more in use than older assets. The amortization of intangibles is the process of expensing the cost of an intangible asset over the projected life of the asset. Negative amortization is when the size of a debt increases with each payment, even if you pay on time. This happens because the interest on the loan is greater than the amount of each payment.

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Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. With an amortization schedule like the one shown above, it’s easy to see exactly how much you owe in interest.

What does amortization mean?

Amortization typically refers to the process of writing down the value of either a loan or an intangible asset. Amortization schedules are used by lenders, such as financial institutions, to present a loan repayment schedule based on a specific maturity date.

For example, a mortgage payment might include costs such as property taxes, mortgage insurance, homeowners insurance, and homeowners association fees. At the beginning of a fixed-rate mortgage, more of the monthly payment is applied to the interest.

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Amortization Schedule Calculator
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