Loan Amortization Table: Guide and Examples

An amortization table is the document that breaks a loan down into each of its payments. Instead of telling the customer “you owe me two thousand and you pay me three-seventy a month”, the table shows exactly what happens in each installment: how much is being paid in interest, how much is reducing the original debt and how much is left to cover.

Every amortization table has, at minimum, these five columns:

• Installment number: the corresponding period (day, week, fortnight or month).
• Opening balance: what the customer owed at the start of that period.
• Interest for the period: the opening balance multiplied by the agreed rate.
• Principal payment: the part of the installment that actually reduces the debt.
• Closing balance: what is still owed after applying the payment.

For a lender, this table is not accounting formality: it is a defensive tool and a sales tool at once. Defensive, because it eliminates “I thought I’d finished paying” and disputes over balances. A sales tool, because a customer who clearly sees what they will pay and when it ends trusts you more and renews more readily.

Microfinance research consistently shows that transparency in credit terms is associated with lower arrears and higher customer retention. Handing over a clear table at disbursement is one of the simplest, highest-impact practices a small lender can adopt.

If you run an active portfolio, a tool like CobrApp generates the amortization table automatically when you create the loan, with no spreadsheet formulas and no arithmetic by hand.

Before building the table you have to decide how the payment will be split between principal and interest. There are three dominant systems, each suited to a different customer profile.

French system (fixed installment): the customer always pays the same amount. At the start most of the installment is interest and very little principal; over time the proportion reverses. It is the most used system because a constant installment is easy to explain and easy for the customer to budget for.

German system (constant amortization): the principal payment is always the same and the interest is recalculated on the balance, so the installment falls each period. The customer pays more at the start, but pays less interest overall.

American system (interest only): for the whole term the customer pays only interest, and the entire principal comes back in the final payment. It produces the lowest periodic installment, but it is the riskiest system for the lender, because the principal stays exposed until the end.

A comparison on a loan of $2,000 at 3% monthly over 6 months:

| System | Installment | Total interest | Best for | | --- | --- | --- | --- | | French | $369.20 fixed | $215.16 | Customers with stable income | | German | $393.33 → $343.33 | $210.00 | Customers who want to pay less interest | | American | $60.00 + $2,060.00 at the end | $360.00 | Businesses with seasonal income |

The reading is direct: the American system costs nearly twice the interest of the other two, because the principal never falls. For small portfolios with frequent collection, the French system is usually the most balanced option.

The procedure is always the same, whether the loan is monthly, weekly or daily. Only the period rate changes.

Step 1 — define the variables. You need three figures: the principal lent, the period interest rate and the number of installments. It is critical that the rate and the period match: if you collect weekly, use a weekly rate; if you collect monthly, use a monthly rate. Confusing them is the most expensive error of all.

Step 2 — calculate the installment. Apply the formula for the system you chose. With the French system and our example of $2,000 at 3% monthly over 6 months:

Installment = 2,000 × 0.03 ÷ (1 − 1.03^−6^)

Installment = 60 ÷ 0.162516 = $369.20

Step 3 — calculate the first installment’s interest. Multiply the opening balance by the rate: $2,000 × 0.03 = $60.00.

Step 4 — separate the principal payment and update the balance. Subtract the interest from the installment and deduct the result from the balance:

Principal payment = 369.20 − 60.00 = $309.20

Closing balance = 2,000.00 − 309.20 = $1,690.80

Step 5 — repeat until you reach zero. One installment’s closing balance is the next one’s opening balance. You repeat steps 3 and 4 as many times as the loan has installments. When the balance hits zero, the table is complete.

A practical detail: because of rounding, the last installment almost never closes at exactly zero. That final installment is adjusted by a few cents so the balance lands on zero. It is normal, and the banks do it the same way.

This is the complete amortization table for a loan of $2,000 at 3% monthly over 6 installments, French system:

| # | Opening balance | Installment | Interest | Principal | Closing balance | | --- | --- | --- | --- | --- | --- | | 1 | $2,000.00 | $369.20 | $60.00 | $309.20 | $1,690.80 | | 2 | $1,690.80 | $369.20 | $50.72 | $318.48 | $1,372.32 | | 3 | $1,372.32 | $369.20 | $41.17 | $328.03 | $1,044.29 | | 4 | $1,044.29 | $369.20 | $31.33 | $337.87 | $706.42 | | 5 | $706.42 | $369.20 | $21.19 | $348.01 | $358.41 | | 6 | $358.41 | $369.16 | $10.75 | $358.41 | $0.00 | | Totals | $2,215.16 | $215.16 | $2,000.00 | — | |

Notice the pattern: on installment 1 the customer pays $60.00 in interest and only $309.20 of principal; on installment 6 they pay just $10.75 in interest and $358.41 of principal. That is the mechanics of the French system, and explaining it to the customer heads off the classic complaint of “I’ve been paying for months and the debt has barely moved”.

The last installment shows as $369.16 instead of $369.20: those are the four cents of rounding adjustment mentioned above.

In Colombia, Peru, Ecuador and much of Latin America, most informal loans do not use compound interest on the balance: they use a flat surcharge on the principal split into equal installments. This is what is known as daily-payment lending.

The mechanics are as follows:

Example: you lend $400 with a 20% surcharge over 25 days.

Total to pay = 400 × 1.20 = $480

Daily installment = 480 ÷ 25 = $19.20

Here the amortization table is simpler, but no less necessary. With 25 installments of $19.20, you and the customer need to know at any moment how many installments have been paid, how many are left and what the balance adds up to. A customer who pays irregularly — $19.20 one day, $8 the next, nothing on the third — makes manual tracking practically impossible after two weeks.

Three recommendations for daily-collection portfolios:

1. Record every payment the same day. Writing it down “later” is the main source of reconciliation gaps in daily collection.
2. Hand over proof at every payment. A receipt with the updated balance cuts disputes off at the root and reinforces your professionalism.
3. Define from the start what happens with delays. Does the term extend, do you charge a late fee, does the installment get recalculated? Deciding after the delay always ends in conflict.

If your operation is daily or weekly, see also our guide on how to calculate daily interest on a loan, where we explain converting between daily, monthly and annual rates.

After reviewing hundreds of portfolios, these are the errors that repeat most often:

• ❌ Mixing the rate with the collection period:

Applying a 3% monthly rate to weekly installments means charging more than four times what you agreed. Before calculating, confirm the rate corresponds exactly to the installment frequency.

• ❌ Charging interest on the original principal:

If the customer has already repaid principal and you keep calculating interest on the initial amount, you are overcharging. Interest is always calculated on the current balance.

• ❌ Not recording extra payments:

When a customer pays ahead, the table has to be recalculated: either the installment drops or the term shortens. Ignoring it produces a phantom balance nobody can explain three months later.

• ❌ Building the table in a spreadsheet without locking the formulas:

One person typing over a formula cell is enough to miscalculate the whole portfolio. And the error usually surfaces once dozens of customers have already been charged too much or too little.

• ❌ Not giving the customer the table:

A table that exists only in your notebook is no backup. Hand a copy to the customer at disbursement: it is your best evidence and your best commercial argument.

The safest way to avoid all five is not to calculate by hand. CobrApp generates the complete amortization table at the moment you create the loan, recalculates it on its own when an early or partial payment comes in, and lets you send the customer proof on WhatsApp with the updated balance. It also works offline, for collectors out on a route.