What does an amortization schedule show?

An amortization schedule is a detailed table that outlines each payment of a loan over its duration, breaking down how much of each payment goes towards the principal balance and how much goes towards interest. This is crucial for borrowers as it provides a clear view of how the loan will be repaid over time, specifying how the outstanding principal decreases with each payment.

The correct choice focuses on the breakdown of each payment, illustrating the gradual progression toward paying off the principal while simultaneously paying interest on the remaining balance. This aids borrowers in understanding their repayment obligations and in planning their finances accordingly.

In contrast, simply knowing the total loan amount or the interest rate over time lacks the detail that an amortization schedule provides. Additionally, while it’s important to be aware of any fees associated with loans, these fees are not represented in an amortization schedule, which focuses solely on loan repayment structure.