Amortization
Amortization is the schedule by which a loan is paid off through fixed monthly payments, with each payment split between interest and principal.
Full definition
Amortization is the process of paying off a loan in a series of fixed payments over its term. Each payment is the same dollar amount, but the split between interest and principal shifts over time: early payments are mostly interest because the balance is large; later payments are mostly principal because the balance has been paid down. An amortisation schedule (or amortisation table) lists every payment in the loan with that month's interest and principal split.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- May 22, 2026
- APR (Annual Percentage Rate)APR is the yearly cost of borrowing, expressed as a percentage of the loan amount. It includes interest plus most lender fees, so it's a more complete measure of cost than the interest rate alone.
- Interest rateThe interest rate is the percentage of the loan balance charged per year as interest, excluding fees. It is a component of, but smaller than, the APR.
- Fixed interest rateA fixed rate stays the same for the entire life of the loan, so the monthly payment never changes. Most U.S. personal loans are fixed-rate.
- Variable interest rateA variable rate can change over the life of the loan, usually tied to an index like the prime rate. Monthly payment can rise or fall.
- Prime rateThe prime rate is the benchmark interest rate U.S. banks publish for their most creditworthy commercial customers. Many consumer rates are quoted as prime + a margin.
- Loan termThe loan term is how long you have to repay the loan, usually expressed in months. Common personal-loan terms are 24, 36, 48, 60, and 72 months.
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