Definition
The process of spreading loan payments over time, so you gradually pay off both the principal and interest.
What to consider
- Review how each payment gradually reduces both your principal and interest.
- Think about making extra payments to cut down your loan term.
- Check your schedule regularly to plan for future expenses.
Real world scenarios
- Every month, Carlos sees part of his mortgage payment reducing his loan’s principal, thanks to the amortization schedule that spreads the cost over 30 years.
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