Explore commonly used personal finance terms.
Amortization is the process of reducing debt over time through regular payments, which cover both the loan’s interest and principal. It is common with loans like mortgages or car loans, where each monthly payment pays down the debt’s principal amount and interest. Amortization schedules can help borrowers understand the breakdown of each payment and the remaining balance. By fully amortizing a loan, the borrower completely repays the loan at the end of the term without needing a large final payment.
