Definition

The process of gradually paying off a debt over time through regular payments, which include both principal and interest.

Example

The amortization of the loan will take ten years, with monthly payments made to the bank.

Conversation

Have you heard about amortization in finance?

Yeah, it’s the way to gradually pay off a loan, right?

Exactly! It helps in understanding how much you owe over time with amortization.

I should learn more about it; it sounds really useful!

Synonyms & Antonyms

Root Explanation

Amortization is formed from "amortir" (from Old French, meaning to kill or extinguish) and the suffix "-ization" (meaning the process of making or becoming). The term refers to the process of gradually extinguishing a debt or obligation over time.

Memory Tip

Think of the word 'amortir' which means to 'extinguish' — this helps you remember that amortization is the process of extinguishing a debt gradually.

Visually Confused Words