Amortization

Amortization is the process of paying off debt through regular payments over time. Each payment covers both interest and a portion of the principal balance.

An amortization schedule shows how each payment is split between principal and interest over the life of a loan. Early payments are mostly interest, while later payments are mostly principal. This applies to mortgages, car loans, and other installment loans.

Related Terms

Principal

Principal is the original amount of money borrowed in a loan or the original amount invested. It doe...

Interest

Interest is the cost of borrowing money or the return earned on deposited funds, typically expressed...

Mortgage

A mortgage is a loan used to purchase real estate, where the property serves as collateral. The borr...

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