Glossary
Amortization
Amortization is paying off a loan in equal installments that each cover that month's interest and part of the principal, so early payments are mostly interest and later ones mostly principal.
An amortization schedule lists every payment, its interest and principal, and the balance left. Paying extra toward principal shortens the schedule and cuts total interest.
Work it out
Related terms
- APR (annual percentage rate)The yearly cost of borrowing as a percentage: on a credit card, the interest rate on balances you carry; on a loan, the interest rate plus certain fees.
- Origination feeA one-time charge for making a loan, often 1% to 10% of the amount on personal loans, usually deducted from the money you receive and included in the loan's APR.
Sources: CFPB: Regulation Z, 12 CFR 1026.22