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A Loan Amortization is timetable of the loan payments until the loan is paid in full. Since the federal government requires lenders to provide the consumer a Truth in Lending disclosure most loans have an amortization schedule. The most common loan under this form of scheduling is a mortgage loan. Lenders are required to disclose to the consumer their monthly payments. The disclosure must inform the customer how much of the payment goes toward the principal and what is applied toward interest. With each payment, the consumer can see how much closer they are towards paying off the loan because of how the payment schedule is broken down.
Types of Amortization Schedules
There are three basic types of amortization schedules a fully, partially and negative amortized loan. A fully amortized loan provides for the loan be paid in full at the end of the payment schedule. With a partially amortized loan the loan is not paid off in full at the end of the term making the loan terms seem longer. The borrower must find a way to pay of the loan at the end of the term. Most people choose to refinance to met this obligation. Lastly there's the negative amortized loan, these loans require the to borrower to pay more than the minimum monthly balance. Paying only the monthly minimum will cause the loans balance to actually increase making the borrower's debt increase.
