Amortization
I mentioned above that amortization charts can be useful for comparing different loans. For example, in the I've created a chart that lets you compare the Balance with and without making extra payments.Instead of two different balances on a single graph, you can also
compare different loans by making modifications within a spreadsheet and
watching the chart as it changes.You can do this with many online
calculators as well. However, one very important thing about comparing
charts dynamically like this is that the scale of the X and Y axes need
to remain the same as you change the loan amount, interest rate, etc. In
Excel, you can set the x and Y axes to fixed scales by right-clicking
on the X or Y axis and selecting Format Axis. In the Scale tab, you'll
find boxes that let you set the minimum and maximum values for the
scale.In the chart below, you'll see how the Balance decreases over time for a
fixed-rate mortgage loan. The mirror image of the Balance is the
Principal Paid. The scary thing is to see how much cumulative interest
you have paid over time, as well. Notice how the Cumulative interest
levels off as you get close to paying off a loan?
Amortization
Amortization
Amortization
Amortization
Amortization
Amortization
Amortization
Amortization
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