An amortization schedule is the correct document used to track principal and interest payments throughout the life of a loan. It provides a detailed breakdown of each periodic payment, showing how much of each payment goes toward interest versus how much goes toward reducing the principal balance. This schedule typically outlines each payment due date, the total payment amount, the interest and principal portions of each payment, and the remaining balance after each payment is made.
This clarity allows borrowers to understand how their payments affect their loan balance over time, helping them grasp the long-term financial implications of their loan agreement. The availability of an amortization schedule also enables borrowers to see how quickly they are paying down their debt and is key for budgeting purposes.
Other documents listed serve different purposes: a loan agreement outlines the terms of the loan, a promissory note acts as a borrower’s formal promise to repay the loan, and a closing disclosure summarizes the final terms and costs of a mortgage, but none of these track payments in the detailed manner that an amortization schedule does.