What is amortization?

Amortization means paying off a loan in installments. How much you want or can pay for your loan each month determines when you choose the repayment period. Larger loans generally require a longer amortization period.

The monthly invoice for your loan includes both interest and fees as well as the actual amortization of the loan.

The two most common types of amortization are:

Annuity
An annuity loan is based on paying a fixed monthly amount each time. As the debt is paid off, the portion of interest decreases and the amortization part increases, thus keeping the total monthly cost steady. Compared to straight amortization, the interest is somewhat higher at the beginning of the repayment period while the amortization portion is lower. With an annuity loan, you thus have a constant monthly amount every month until the loan is fully paid off. We use this amortization model for our unsecured loans. 

Straight amortization 
Straight amortization is the most common type. It means that you amortize the same amount of the loan each month. As the debt decreases, the interest also decreases – thereby the total monthly cost becomes lower over time.