Amortization (business)

For other uses of Amortization, see the Amortization disambiguation page. Amortization is the distribution of a single lump-sum cash flow into many smaller cash flow installments, as determined by an amortization schedule. Unlike other repayment models, each repayment installment consists of both and interest. Amortization is chiefly used in loan repayments (a common example being a mortgage loan) and in sinking funds. Payments are divided into equal amounts for the duration of the loan, making it the simplest repayment model. A greater amount of the payment is applied to interest at the beginning of the amortization schedule, while more money is applied to principal at the end.
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