Repayment schedule

Repayment schedule are timelines agreed between banker and borrower about paying the loan agreement . The schedule is part of contractual terms. The repayment schedule is characterised by regularity so that payments are done on monthly, quarterly, half-yearly, yearly cycles. In the loan agreement, except of the repayment schedule, are included should be included also :

• the amount of money which is borrowed,
• rate of interest,
• fixed maturity date.

Repayment procedures of loans

There are four types of repayment procedures:

1. bullet payments,
2. semi bullet (interest-only payment),
3. balloon payments,
4. plan with fixed payments.

Example of repayment schedule

Below is presented example of repayment schedule regarding mortgage. Sum of interest payment value and principal repayment value per payment period gives the monthly payment value. With the time, when more payments are done, amount of interest payment is decreasing and amount of principal repayment is increasing. It means that firstly great value of interest payment of mortgage is covered, after time the situation is changing and interest payment are smaller but principal repayment increases - in total, monthly payment still stays the same but the proportions between interest payment and principal payment are changing. Repayment schedule finishes when balance of loan account is zero, so when both interest payment and principal repayment are paid off. Below is shown example of the mortgage taken for 25 years with repayment schedule related:

• type: mortgage,
• amount of money in dollars: 150.000,
• rate of interest: 8%,
• fixed maturity date: 25 years,
• monthly payment: 1 158 $.

Repayment schedule

Number of payment	Interest payment in dollars	Principal repayment in dollars	Balance of loan in dollars
1	1 000	158	149 842
2	999	159	149 684
3	998	160	149 524
...	...	...	...
148	739	419	110 407
149	736	422	109 985
150	733	424	109 561
...	...	...	...
298	23	1 135	2 293
299	15	1 142	1 150
300	8	1 150	0

Footnotes

Repayment schedule — recommended articles

Loan amortization schedule — Flat interest rate — Amortization table — Short rate cancellation — Sinkable bond — Notice account — Breakage cost — Accrual rate — Unearned Premium

References

• Arora M., Singh S. (2017) Grass root Financial Management Practices of Self Help Groups in Himachal Pradesh: An Empirical Investigation in "ENVISION - International Journal of Commerce and Management No.62481 VOL-11"
• Bai Y., Kim S. T., Mihalache G. (2017), The Payment Schedule of Sovereign Debt, Stony Brook University
• Chandra R. (2013), MBA in banking, BookRix
• Mayo H. B. (2013), Investments: An Introduction, Cengage Learning
• Morri G., Mazza A. (2014), Property Finance: An International Approach The Wiley Finance Series, John Wiley & Sons
• Student Loans Company (2012), Repaying your student loan, Student Loans Company, Great Britain
• Weltman B. (2008), JK Lasser's Small Business Taxes 2009: Your Complete Guide to a Better Bottom Line, John Wiley & Sons

Author: Aleksandra Puchała