↩ Back

Amortization

Gradually reducing a debt by periodic installments.  

Example: A $150,000 loan is arranged at a 5% interest rate.  The borrower pays $15,000 in the first year. Of that payment, $7,500 is for the interest owed, and the remaining $7,500 serves to amortize the loan balance.  After that payment, the loan balance will have been amortized to $142,500.