What Is Loan Amortization?

Amortization is the schedule that pays down a loan over time. Each payment covers interest on the remaining balance plus a slice of principal. Early payments are interest-heavy; later payments are principal-heavy.

Why your balance does not drop linearly

Interest accrues on whatever principal is still outstanding. That is why doubling your payment in year one saves more total interest than the same extra payment in year twenty.

Fixed-rate vs adjustable

Fixed-rate loans usually keep the payment steady while the principal portion slowly rises. Adjustable loans can change the payment when the index rate resets.

Model home loans with the Mortgage Calculator and generic principal–interest schedules with the EMI Calculator.