When you make a loan to another individual or organization, you need a reliable way to ensure that repayment will be completed in a timely manner. With an amortization schedule in place, the process is greatly simplified.
With an amortizing loan, the borrower is required to make regular payments that cover both interest and a portion of the principal. The amount of the payment is consistent, which makes it simple for the borrower to stay on track. As the unpaid principal balance shrinks over time, the portion of each payment that is consumed by interest is reduced, allowing the borrower to begin paying off more of the principal with each payment.
You can certainly make a loan without having an amortization calculator, but you may have a harder time setting up a workable payment schedule and ensuring that the borrower remains on track throughout the life of the loan. This can lead to unpleasant surprises down the road.
Attempting to set up an amortization schedule using a spreadsheet may seem like the most straightforward option, especially if you already have experience using a program like Excel. However, this can be risky, as a seemingly trivial typographical error could lead to all of the dependent calculations being wrong, creating substantial problems for both the lender and borrower.
With specially designed software, stakeholders can be confident in the accuracy of the schedule they are using and ensure that steady progress is made on repayment. It can also be useful to be able to generate and print or export amortization schedules on demand, without having to worry about formatting or other issues that can arise with a generic spreadsheet.
When selecting an amortization software solution, it pays to be discerning and ensure you are selecting a provider that offers responsive service and comprehensive technical support.