noun

amortization

am-uhr-tuh-ZAY-shuhn

Amortization (noun) means the process of paying off a debt in regular instalments over a set period, so that each payment covers interest and part of the principal until the balance reaches zero. Example: “Ask the lender for an amortization schedule so you can see how much of each payment is interest.”

noun

The process of paying off a debt in regular instalments over a set period, so that each payment covers interest and part of the principal until the balance reaches zero.

"Ask the lender for an amortization schedule so you can see how much of each payment is interest."

"A thirty-year amortization keeps the monthly cost down but costs far more in total."

accounting In accounting, the spreading of the cost of an intangible asset, such as a patent or software licence, across the years in which it is expected to be useful.

"Amortization of the acquired trademarks reduced reported profit by $4 million."

How to Use Amortization

Learner’s notes

In plain EnglishPaying off a loan bit by bit, or spreading a cost over several years.

When to use it

Formal. American spelling; British English usually writes amortisation.

Memory tip

The root is Latin for death: you are gradually killing off the debt.

Trace the full origin ↓

Easily confused with

amortization / depreciation amortization / loan term

Common pairings

amortization schedule amortization period negative amortization depreciation and amortization EBITDA

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Ask the lender for an _____ schedule so you can see how much of each payment is interest.

Etymology

From Old French amortir 'to deaden, extinguish', ultimately from Latin ad- 'to' + mors, mortem 'death'.

Origin: Old French

Synonyms

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repayment paying down write-down

Related Words

paying payment reward refund repayment depreciation

Rhymes for amortization

region billion ablation allusion emulsion ideation novation abortion abrasion diffusion elocution extension

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Frequently Asked Questions

What is the difference between amortization and depreciation?

They are the same idea applied to different assets. Depreciation spreads the cost of tangible things such as vehicles and machinery; amortization spreads the cost of intangible things such as patents, goodwill and software. Both reduce reported profit without any cash leaving the business.

What is an amortization schedule?

It is a table showing every scheduled payment on a loan, split into the interest portion and the principal portion, with the remaining balance after each one. Early payments are mostly interest; later ones are mostly principal.

Is amortization spelled amortisation in British English?

Yes, British writing generally uses amortisation, though the -z- form is also accepted in the UK. The word is far more common in American finance, so the -z- spelling dominates online.

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