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Loan Amortization
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By Ben Afzal

Amortization is the repayment of a loan. It is usually used in conjunction with a time frame. For example, a 30 year loan term amortizes over a 30 year time frame.

The longer the term is for a loan the slower it amortizes. This slower amortization means a lower monthly payment. It can also mean more interest paid out over the life of the loan.

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HOME LOANS ADVERTISEMENT

A typical loan payment involves two components:

part of it is the interest payment,
and part of it paying off the principal

A constant payment on a 30 year fixed loan term amortizes each month over a period of 360 months. This is normal amortization.

Amortization can also work in reverse. Minimum payment option loans, such as

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This entry was posted on Sunday, June 11th, 2006 at 7:28 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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