Amortization
The schedule by which a fixed loan payment gets split between interest and principal over time.
Why it matters
On an amortizing loan, each equal monthly payment starts mostly interest and shifts toward mostly principal over the life of the loan. This is why early extra payments have an outsize effect: they cut the balance the interest is calculated on for every remaining month.
Learn deeper
Loans — What borrowing costs
See also
Educational only — not financial, tax, or legal advice.