An amortization schedule is a detailed table that outlines each payment on a loan over time, breaking down how much of each payment goes toward interest and how much goes toward the principal balance. This schedule is crucial for understanding the repayment process of loans, particularly mortgages, as it provides transparency on the gradual reduction of the debt and helps borrowers plan their finances. By illustrating the diminishing balance owed over time, an amortization schedule also highlights how interest payments decrease as the principal is paid down.
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