Amortization schedule software is a tool used to evaluate the costs associated with financing a purchase. Amortization is the process of allocating a lump sum over different time periods. There is a financial impact to this process because of the value of money over time. This concept is found in both investing and financial loans.
An amortization schedule is a table that provides the payment value due for each period of the term. Although the payment amount typically is fixed, the amount that is applied to interest and principal changes over time. Each time a payment is made, the principal decreases. The amount of interest due is recalculated for the next period. At the beginning of the term, the majority of any payments are applied to interest, while the the majority of the payment amount toward the end of the term goes to reducing the principal.
The primary purpose of amortization schedule software is to quickly and accurately calculate the impact of various finance options. Used most commonly for loans, the software should include multiple loan types, compounding periods and payment frequencies. Additional features might include balloon payments, late payments and additional fees.
Amortization schedule software is usually incorporated into a customer management system, where the client account details are stored. The software is used to provide the principal balance outstanding at the end of each period, allocation of payment to principal and interest and any additional fees or notes. The software can be used to create estimates for potential loans, using the calculation function to determine the monthly payment amount for car loans, mortgages and any other type of loan.
Features that create added value when purchasing amortization schedule software include document merging. This allows data from the schedule to automatically populate a written document, such as the loan agreement or statement of account. This time-saving feature also improves data quality, because the information is obtained from one source, with no change for human data entry error.
Output and integration options are very important with amortization schedule software. Data must able to be exported into the most common formats, including Microsoft Excel®, text or a comma-separated file. Format templates to control printing is an important factor in product usability.
This type of software is most commonly found in financial institutions, loan offices and credit management organizations. The accuracy and speed of amortization schedule software has made a huge impact in loan processing time, allowing businesses to provide accurate, complete information very quickly.