Amortization is an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time.
 | | Term of the Day | Words to Know | | |  | | Amortization | | Amortization is an accounting technique used to periodically lower the book value of a loan or intangible asset over a set period of time. The term "amortization" can refer to two situations. First, amortization is used in the process of paying off debt through regular principal and interest payments over time. An amortization schedule is used to reduce the current balance on a loan, for example a mortgage or car loan, through installment payments. Second, amortization can also refer to the spreading out of capital expenses related to intangible assets over a specific duration – usually over the asset's useful life – for accounting and tax purposes. | | Read More » | | Related to "Amortization" | | | | Loan | | A loan is money, property or other material goods given to another party in exchange for future repayment of the loan value amount with interest. A loan may be for a specific, one-time amount or can be available as an open-ended line of credit up to a specified limit or ceiling amount. | | Read More » | | | Interest | | Interest is the charge for the privilege of borrowing money, typically expressed as an annual percentage rate. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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