Amortization

Paying off a loan in equal payments, where each payment covers that month's interest first and the rest goes to the balance.

Amortization is how installment loans like mortgages, car loans and personal loans are paid off. The monthly payment stays the same, but what it pays for changes over time.

Early on, a bigger share of each payment goes to interest, because the balance is high. As the balance shrinks, less goes to interest and more goes to principal. That's why extra payments early in a loan save the most interest.

An amortization schedule is the table that shows, payment by payment, how much goes to interest, how much to principal, and the balance left.