When you take out a loan—whether it’s a mortgage, car loan, or student loan—you’ll usually receive an amortization schedule. This schedule details every payment you’ll make over the life of the loan, breaking down how much goes to principal and how much to interest each month. While these schedules are incredibly useful, they’re not always perfect. Errors can and do happen, and catching them early can save you a lot of money and trouble.
Below, we cover the most common errors found in amortization schedules and how you, as a borrower, can protect yourself.
1. Incorrect Interest Rate or Loan Terms
Even a small typo in the interest rate, loan term, or starting balance can lead to major discrepancies in your schedule. This might result in higher payments, unexpected balloon balances, or paying too much interest over time.
How to check:
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Compare your schedule against your loan agreement.
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Double-check the interest rate, loan amount, and term (number of months/years).
2. Miscalculated Monthly Payment
Amortization calculators sometimes use the wrong formula or miss key variables (like extra payments or specific compounding rules). This leads to incorrect monthly payment amounts or a mismatch between total payments and the original loan balance.
How to check:
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Use a trusted online amortization calculator and plug in your numbers.
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If the monthly payment doesn’t match your lender’s figure, ask for clarification.
3. Improper Handling of Extra Payments
Many borrowers make extra payments to pay down their principal faster. However, some schedules don’t account for these additional payments, leading to inaccurate projections or missed opportunities for interest savings.
How to check:
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Ensure extra payments are applied directly to principal, not just to future interest.
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Ask for an updated schedule after making any extra payments.
4. Wrong Start Date or Payment Dates
Sometimes, the amortization schedule doesn’t line up with your actual payment dates, causing confusion or misapplied payments (especially with biweekly or irregular payment plans).
How to check:
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Confirm your payment schedule matches your contract and actual payment history.
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Look for skipped months, duplicate payments, or mismatched due dates.
5. Missed Fees or Escrow Changes
Your schedule may not reflect changes in escrow payments (taxes/insurance) or new fees added by the lender. This can make your “true” monthly payment higher than what’s on your original schedule.
How to check:
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Review annual escrow statements and update your budget accordingly.
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Question any unexplained increases in your payment.
6. Failure to Reflect Adjustable Rates
For adjustable-rate loans, schedules may not properly project interest rate changes, resulting in inaccurate payment forecasts.
How to check:
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Review how your schedule handles rate adjustments—are future payments recalculated based on caps and indexes?
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Request clarification if your payment projections seem off.
7. Human/Data Entry Errors
Simple input mistakes—like an extra zero in the principal, a swapped decimal, or a wrong payment start date—can throw the whole schedule off.
How to check:
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Always cross-check numbers between your amortization schedule and your signed loan documents.
What to Do If You Spot an Error
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Contact your lender immediately for clarification.
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Request a corrected schedule if there’s a confirmed error.
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Document all communications and keep copies for your records.
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Consult a financial advisor if the issue isn’t resolved quickly.
Conclusion
Amortization schedules are a powerful tool—but only when they’re accurate. Take time to review yours carefully and don’t hesitate to ask questions if something looks off. A little vigilance now can prevent costly surprises later.