Amortization Example:
If Loan amount is 500,000, interest rate is 5%, loan term is 12 months then what will be Payment amount, Principal amount, Interest and balance will be on the 6th month.
Answer: -Amount on 6th month
Payment amount=42,803.74,
Principal =41,575.85
Interest=1,227.89
Balance=253,118.35
Benefits:
Predictable Payments: Allows borrowers to budget and plan for fixed monthly payments.
Build Equity: Gradually paying down the principal balance, which increases your equity in the asset
Interest Savings: Potential savings in interest costs over time