Amortization

An amortizing loan is repaid in equal installments. Each payment first covers the interest that built up on the balance since the last payment; whatever is left goes to principal. Because the balance is largest at the start, early payments are mostly interest and later payments are mostly principal.

An amortization schedule lists every payment with its interest portion, principal portion, and remaining balance. It shows how much interest you'll pay over the life of the loan and how much an extra payment would save.

Mortgages, auto loans, student loans, and most personal loans amortize. Credit cards and interest-only loans don't follow a fixed schedule.