Debt & Credit Intermediate

Amortization

💡 In plain English: How a loan gets paid off over time — early EMIs are mostly interest, later EMIs become mostly principal.

Definition

The process of gradually paying off a debt through regular payments, where the split between principal and interest changes over the loan's life.

📌 Real-World Example

Month 1 of ₹30L home loan: EMI ₹26,536 = ₹21,875 interest + ₹4,661 principal. Month 120 (year 10): same EMI = ₹13,200 interest + ₹13,336 principal. The mix shifts gradually.

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Related Terms

APR (Annual Percentage Rate)
The true annual cost of borrowing money, including all fees — more...
Interest Rate
The price you pay to borrow money — expressed as a percentage per year.
EMI (Equated Monthly Instalment)
The fixed monthly payment you make toward a loan — includes both...
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⚠️ Educational Content: All definitions and examples on this page are for educational and consultancy reference purposes only. They do not constitute financial, legal, or investment advice. Moneykar is not registered with SEBI, CBUAE, SCA, or any financial regulator. Consult a qualified professional before making financial decisions.

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