Final answer:
Blended payment loans require a loan amortization schedule to separate principal and interest, enabling both borrowers and lenders to track the gradual reduction of the loan balance and understand the allocation of each payment over the course of the loan's term.
Step-by-step explanation:
Blended payment loans are a type of loan where each payment consists of both the principal and the interest. The necessity for a loan amortization schedule arises because it helps borrowers and lenders track the exact amount of principal and interest included in each payment throughout the life of the loan. Amortization schedules are essential to ensure that the loan balance decreases over time as payments are made, and they also provide a clear picture of the loan's progress for both parties. Usually, the initial payments in a blended payment plan consist of a higher proportion of interest, with the principal portion gradually increasing as the loan matures. This is due to the way that interest is calculated on the remaining balance of the loan. Hence, providing a breakdown of principal and interest allows borrowers to understand how much of their payment is actually reducing the loan balance.