What is the purpose of an amortization schedule?

• A. To determine credit score
• B. To estimate property taxes
• C. To track savings growth
• D. To show how loan payments are split between interest and principal over time

Answer: (D)

An amortization schedule shows how each loan payment is divided between interest and principal over time. For every payment, it lists the amount paid, how much goes to interest on the remaining balance, how much reduces the principal, and what the balance is after that payment. This makes it clear how the loan balance declines, how much total interest you’ll pay, and when the loan will be fully paid off. The focus is on the exact breakdown of each payment and the evolving loan balance, rather than on credit scores, taxes, or savings growth. In short, its purpose is to show how loan payments are split between interest and principal over time.