Explain the term amortization - Computers & Internet

If you have taken a loan - home, car or any other loan - you must familiarise yourself with the process of loan amortisation. Firstly, you pay the cost of the cash advance, i.e., the interest charged by the lender. Secondly, you also pay down some of the loan that you took, i.e., the principal amount of the loan. Over time, your EMIs result in a gradual reduction in the outstanding principal amount of the loan, i.e., you keep reducing your indebtedness. This process of paying down the loan is referred to as loan amortisation.

The process of paying off a loan through specifically structured periodic payments is known as amortization. Amortized loans are different from other loans due to the way the amount and the structure of each payment is determined.

mortgage payments are a common form of amortized loans, and interestingly enough, both the term mortgage and the termamortization find their meaning in the same root word "mort." This term means to deaden or kill, as in to "kill off" or eliminate the loan a bit at a time, via regular payments.