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Q.What are amortized payments?

A.Amortized payments are most often found in vehicle loans and home loans. With an amortized loan, you make the same exact monthly payment for a specified number of months. Part of each payment goes toward the principal (the amount you borrowed) and the rest goes towards the interest. When you make the last payment, the loan and interest are fully paid.

To create an amortized payment schedule, you will need the following:

  1. The amount to be borrowed;


  2. The interest rate (e.g. 5% per year);


  3. The time over which the borrower will make payments (e.g. 12 months); and

With the facts in hand you can create a simple amortization schedule using software such as Intuit's Quicken or Quickbooks, or our online amotization calculator.




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