Fact Checked

What is Amortization Schedule Software?

Carol Francois
Carol Francois

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.

Man holding computer
Man holding computer

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.

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Discussion Comments


@MrMoody - You can find a mortgage calculator amortization schedule if you need to figure out what your financing options will look like. This will let you do things like experiment with various interest rates as well as to see what happens if you put a bigger down payment and stuff like that.

My opinion is that the biggest chunk of money you can put down to start with, the better off that you will be in the long run. I believe that any prepayment strategies you use will be more effective if you have a lot of equity to start with.


@NathanG - You can use home loan amortization software to your benefit however. You can use it to determine how to prepay your loan, using biweekly mortgage payments or a single extra payment at the end of the year.

There are other strategies of course but these are some of the most common. The point is that the software is not just for the benefit of the banker. You can use it to pay down against the principal and save yourself hundreds of thousands of dollars in interest costs.

Of course, there is a benefit to having all that interest – you can deduct it on your taxes. But I’d rather have a house mortgage free personally.


The first time I looked at a mortgage schedule I cringed. It was our first home and the banker had this software that printed out the schedule for us.

I was surprised at how little of my monthly payment was going to go to the principal and how much towards the interest. Bankers were getting rich in a hurry. Clearly they were front loading the interest to make sure that they made their profits quickly.

But the schedule revealed another interesting pattern. At a certain point the slope changed direction; more money went towards the principal and less to the interest. I don’t remember where this was; I think it was after twenty years into the loan. That’s a long time to wait to see things turn in your direction.

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