Amortization is the portion of your payment that reduces the principal of the loan. In addition to amortization, you also pay interest and any applicable fees.
How much you amortize each month depends, among other things, on the loan amount and the repayment period you have.
With annuity amortization, you pay a fixed monthly amount, as long as the interest rate remains unchanged.
At the beginning of the repayment period, a larger portion of the monthly amount consists of interest and a smaller portion of amortization. As the debt decreases, the interest portion becomes smaller and the amortization portion becomes larger.
We use annuity amortization for our unsecured loans.
What is straight-line amortization?
With straight-line amortization, you amortize the same amount every month. As the debt decreases, the interest cost also decreases. This means that the total monthly payment usually becomes lower over time.
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