Amortization: The gradual repayment of a debt by means of systematic payments of principal and/or interest over a set period, so that at the end of the period there is a zero balance. The principal is thus directly reduced or amortized over the life of the loan. Some loans are not fully amortized, and require a balloon payment at the end of the term of the loan.

 

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Amortization: Amortization is payments of debt in equal instalments of principal and interest, rather than interest only payments.

Amortization Factor: The pool factor implied by the scheduled amortization assuming no prepayments.

Effective-Interest Amortization: A method of systematically writing off a bond premium or discount that takes into consideration the time value of money and results in an equal rate of amortization for each period.

Negative Amortization: When your loan principal increases rather than decreases because your monthly payment isn’t enough to cover the loan interest, that’s called negative amortization. This can happen if you hav . . . View Full Definition