Loan amortisation
The gradual repayment of borrowed principal through scheduled payments.
Definition
The gradual repayment of borrowed principal through scheduled payments.
Why this concept matters
It explains how a payment is split between interest, possible insurance and repaid principal.
How it works
At each payment date, interest is calculated on the outstanding balance; the remainder of the payment reduces that balance.
What to watch
At the start of an amortising loan, the interest portion may be larger.
Simple example
Of a €900 payment, one part pays interest and the remainder reduces the balance.
Example currency : France (EUR). The reference country controls the example currency.
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