Amortization Definition

Amortization is the process of paying down a debt through scheduled, periodic payments. In regards to taxation, it is also used to describe the process of writing off the cost or value of an asset. However, in the context of personal finance, the term almost always means paying down a debt by means of making regular scheduled payments, most often monthly.

Although the amortization schedule need not assign the same payment amount to each payment period, in practice this is nearly always the case excepting the final payment. Also, Amortization payments almost always include the related interest and finance charges arising from the loan.