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Now, believe it or not, I have a degree in accounting. I have this thing about numbers, and I think spreadsheets are really cool. What's so cool about them? Mostly the ability to play "what if." To go to a worksheet like this and plug in new numbers for the assumptions, just to see how the rest of the numbers change. Let's give it a try. Now, if you've followed along in the previous video build to build your own Amortization Table worksheet, you should have something like this in front of you. If not, you can open the one in the Exercises folder. It's called Amortization. Otherwise you are just going to have to watch me have all the fun.
Now, suppose the car you want to buy will require a $30,000 loan instead of a $20,000. You could plug in the new number. Just type up here next to Principal and type in $30,000. When you press Return or Enter, the worksheet changes, the new payment, the new interest, and all that. What if you change the percentage rate? What if you got a better interest rate, only 7%? Again, it all changes. What if you are going to pay over 4 years instead of 5? It all changes. Now, what if you are buying a house or a building instead of a car? Let's put in $200,000 up here, and then maybe your interest rate is a little bit better, say 6%.
Probably not going to pay for that over 4 years, maybe it will be 15. So I have changed all three of these values here and it changes accordingly. What's scary here is the amount of interest paid over the term of that loan. Keep in mind that if you do change this to more years, 15, now if you scroll down in this worksheet, it only goes up to the first 5 years. So what you would want to do is you would want to copy this information down if you want the detail for every single year. It's pretty easy. You just select it and drag down. I will show you. I will select 2 to make sure we get the right years, and just go down, and you see how it all changes.
You would want to move that down for the number of months that you need. Just to show you, if you took that house payment and you did it over 30 years instead of 15, most people would want to do something like that to change the monthly payment. Let's just change it to 30 to see what happens. And sure, the monthly payment has gone down quite a bit. But if you look your interest paid now is more than the original principal, which means that over the 30 years you will have paid out $431,000, which is a lot of money.
But you get the idea. Spreadsheets are pretty cool. While an Amortization Table can clearly show you how much of each monthly payment goes towards interest and principal, the assumptions and the main calculations area can be a vital decision making tool. By playing "what if" to evaluate different loan options, you can clearly see how much each loan will cost you. Hopefully, this information can help you make a better financial decision.
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