LENDING GLOSSARY
Amortization
Amortization
The scheduled reduction of a loan balance through principal and interest payments.
What does Amortization mean?
The scheduled reduction of a loan balance through principal and interest payments. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Amortization in context
A 20-year commercial mortgage gradually pays down principal over 240 monthly payments.
Why it matters in financing
Amortization can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related lending terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.