Amortization

The word "amortization" comes from the Latin "amortiser" and means to repay or pay off. Amortization is used in connection with the repayment of a debt or other credit, such as an overdraft, between a lender and a borrower - between a debtor and a creditor.

The term amortization is rarely used by private companies today, instead using words like installment or repayment to describe what needs to be paid off on a debt or credit.

On the other hand, the word is often used by banks and especially mortgage companies, typically in connection with a repayment plan, which is called an amortization plan.

Related word: Installment plan

Amortization schedule

Lenders and borrowers rarely talk about amortization without mentioning an amortization schedule. An amortization schedule is a plan for the repayment of a debt or credit and is almost always provided when you take out a loan with a bank or mortgage company.

The amortization schedule is often part of the other loan documents and shows both lender and borrower how the overall plan is progressing - from loan origination to settlement and up to the end date.

In the amortization schedule, you can see how much interest and costs are accrued, the total number of installments, when they are due, and what month or quarter you as a borrower will finish paying off.

An amortization schedule is often formatted as a simple table with one line for each installment. If the loan is settled quarterly, the individual lines in the amortization schedule will also be in quarters - and similarly if the loan is settled monthly.

It is not a requirement that a lender prepares an amortization schedule, but as a borrower you should demand one.