Final answer:
An amortization schedule breaks down loan payments into principal and interest, crucial for planning large purchases like homes and cars.
Step-by-step explanation:
An amortization schedule details each loan payment's allocation between principal and interest and the beginning and ending loan balances. When dealing with large purchases like home loans and auto loans, understanding the specifics of the loan, including interest rates and how payments are applied, is essential for financial planning.
Whether issuing loans or buying and selling them in the secondary loan market, banks consider these loans as assets. Payment structures often require borrowers to pay both the principal amount and interest, which changes over time due to the way payments are distributed.