You currently have a one-year-old loan outstanding on your car. You make monthly payments of $ 500. You have just made a payment. The loan has four years to go (i. e., it had an original term of five years). Show the timeline from your perspective. How would the timeline differ if you created it from the bank's perspective?

Since there is not enough room here, I prepared an amortization schedule on an excel spreadsheet. The amortization schedule starts on year 1 (red color) and ends on year 5.

I also assumed a $23,500 initial loan (principal) and a 10% annual rate. I did this just to show how much principal is reduced every month and how much interest is paid. Your liability (loan's principal) decreases month by month.

If you are a bank, instead of interest expense, you would consider this an interest payment, and as the principal decreases, your asset (loan) decreases.