Repayment plan

A payment plan is a plan to pay back an amount to a lender or creditor - typically in connection with a loan.

The repayment schedule is a detailed overview of when a payment is due, how much is due, what interest may be charged, and when repayment is complete.

This gives both the lender and the borrower(debtor and creditor) an overview of the repayment plan.

Legally, a repayment plan is also called an amortization schedule or amortization table and is typically presented in connection with a bank loan or mortgage.

If you are not presented with an amortization schedule by the bank or other lenders, you will typically be able to ask for it.

Why make a repayment plan?

There are many good reasons to create a repayment plan, both for the lender and the borrower.

The most important task of a repayment plan is to provide overview and clarity about a loan and its most important aspect: the repayment itself.

For many borrowers, a loan can seem overwhelming, but a repayment plan provides a clear overview of the entire process and shows when you are debt-free.

What does a repayment plan look like? - Example of a repayment plan

A repayment plan is relatively easy to create and is typically designed as a table with rows and columns.

The rows represent each installment (repayment), while the columns typically show information about debt, repayment, any interest and outstanding debt.

An example of a repayment plan could be that a borrower has to pay 1,000 DKK every month on a principal of 10,000 DKK.

Here, the repayment will consist of 10 rows, each with a different installment for each month.

If interest is charged on the loan, this will appear in each row for each month.