Amortization

Definition

Amortization is the process of spreading out a loan into a series of fixed payments over time. Each payment covers both the interest expense for the period and a portion of the principal balance. An amortization schedule shows the breakdown of each payment into principal and interest components, along with the remaining balance after each payment. In the early years of a loan, a larger portion of the EMI goes toward interest; toward the end, most goes toward principal. Indian banks provide amortization schedules for home loans, car loans, and personal loans.