1. Debt 1

2. Interest rate: Annual Percentage Rate APR 2

3. Payment: Two components Interest payment: Owed to lender for privilege of using his/her/its money... How lenders make a profit Payment against principal: Portion of payment used to pay off the amount owed (amortization) 3

4. Interest payment If one payment per year: INT=balance x APR Where APR has been converted to proportion If more than one payment per year: INT=balance x APR/n Where n is the number of payments per year 4

5. Principal 1.The original amount of the loan 2.A synonym for balance: The amount still to be paid off 3.The portion of a payment applied to the reduction of the balance 5

6. PAYMENT = INTEREST + PRINCIPAL 6

7. PRINCIPAL = PAYMENT - INTEREST 7

8. Fixed and variable payment schedules Fixed means the amount of time for amortization of the debt is set, then the payment amount is computed e.g.: 5 year car loan, 30 year mortgage 8

9. Variable payment schedule: Amount of payment is set, then the amount of time for amortization is computed. e.g.: Payment of $100 per month on credit card debt until debt is completely paid, not matter how long it takes 9

10. Amortization table: Fixed payment schedule Payment Period Beginning BalancePaymentInterestPrincipal Ending Balance (blank) Enter original amount of debt 1=Ending balance, previous row =PMT function * -1 =Beginning balance * APR/n =Payment - Interest =Beginning Balance - Principal 10

11. Amortization table: Variable payment schedule Payment Period Beginning BalancePaymentInterestPrincipal Ending Balance (blank) Enter original amount of debt 1=Ending balance, previous row =amount of payment (equals sign must be entered) =Beginning balance * APR/n =Payment - Interest =Beginning Balance - Principal 11