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Be it a loan that you have borrowed from a bank or an expensive intellectual property that you have purchased recently, it is going to cost you over the years until they are paid off or expire. Amortization is a method that is used for both expensing the loans and spreading the cost of intangible assets for businesses over their useful lives. An annual amortization will define the value that will be expensed in a year during the useful life of an asset or during the loan tenure.

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The calculation of annual amortization can do just that for you by showing you the total value that you owe the bank or other creditors in the coming year. It can also show you the expensed yearly value of an intangible asset during its life cycle. Let's find out more about annual amortization.

Amortization defines the process of paying off debt over time in equal monthly installments, Also, it is used widely for spreading the cost of intangible assets over time. The cost of these payments that occurs during a year can be defined as annual amortization.

You can calculate the amortization with by complete below mentioned two steps:

In the first step, you will calculate the monthly EMI amount, which you can do with the help of the following formula:

A = P[r(1+r)^{n}/((1+r)^{n})-1)]

Where:

**A**= The total monthly EMI payment.**r**= Your monthly interest rate. This is provided by the lenders as an annual rate. However, the formula calls for the monthly interest rate, so divide that annual rate by 12 (the number of months in a year) to get the monthly rate.**P**= The total amount that you have borrowed from the bank.**n**= number of payments over the entire loan tenure. This can be obtained by multiplying the number of years of the loan tenure with 12 (number of months in a year).

The second step is to multiply the EMI by with 12 in order to get the annual amortization amount. It might be a complex calculation if you do not have a good experience in financial accounting. Fortunately, there is another way of doing this. An online calculator such as the Annual Amortization Calculator which is designed by iCalculator could solve your equation with just a few clicks, Let's see how the calculator works.

In order to get the annual amortization from the calculator, the following details would be required from you:

**Loan Amount:**This is the principal balance as discussed above.**Loan Term:**Enter the term of the loan in years, no need of any division or multiplication.**Interest Rate:**Input the interest rate value that is offered by your bank.

Just by entering the above information, the calculator will provide you with a chart that will contain your desired results. Let's see how using the calculator will benefit you.

The Annual amortization calculator is online and easy to use, that provides you with the detailed chart that contains the following details:

**Monthly Pay:**This will show you the amount of Equated Monthly Installment.**Principal Paid:**This column will show you the amount of principal that you will pay for each year until the loan tenure reaches its end and the loan is matured.**Interest Paid:**Similar to the principal paid, this column will contain the amount of interest that will be paid each year.**Loan Balance:**This column will show you the remaining amount of the principal amount that will be used in the interest calculation for the following year.

You will be able to see the results for as long of the loan term as you want, which will help you decide on what is the yearly payment that you will be able to afford.

The calculator can be used for already running loans as well, just so you know what you are actually paying.

As explained above you may also use the calculator to spread the cost of your intangible assets such as copyrights, patents, trademarks etc. This is done by simply replacing the loan amount with the cost of asset, loan term, with the useful life of the asset and interest rate with the estimated rate on which the asset will be expensed.

The results obtained from the calculator can be noted and saved for comparisons of loan offered by various banks as well as to compare the cost of assets.

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