Meaning & use
amortization
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Meanings
noununcountablefinance
The paying off of a loan in regular installments that cover both interest and part of the original amount.
Grammar: Usually uncountable and follows words such as loan or mortgage: loan amortization.
Patterns
- amortization of a loan
- amortization schedule
The mortgage amortization lasts thirty years.
An amortization schedule shows how each payment is divided.
Early amortization of the debt reduced the total interest.
noununcountablebusinesstechnical
The spreading of the cost of an intangible asset, such as a patent, across the years it is useful.
Grammar: In accounting, it is applied to intangibles; for physical assets the word is depreciation.
Patterns
- amortization of something
The firm records the amortization of its patent every year.
Amortization of goodwill lowered the reported profit.
The accountant explained the amortization expense on the license.
Common combinations
- amortization schedule
- The bank provided an amortization schedule for the loan.
- loan amortization
- Loan amortization means your balance falls with each payment.
- amortization period
- A longer amortization period lowers the monthly payment.
- amortization expense
- Amortization expense appears on the income statement.
- negative amortization
- With negative amortization the balance can grow.
- accelerated amortization
- Accelerated amortization let them clear the debt sooner.
Synonyms and how they differ
- repayment
- Repayment is the general word for paying back money, while amortization names a structured schedule of equal parts.
- depreciation
- Depreciation applies to physical assets losing value, whereas amortization is for loans and intangible assets.
- write-off
- A write-off removes an asset's value at once, but amortization spreads the cost over time.
Word family
- amortize verb
- to pay off a debt or spread a cost gradually
- amortizable adjective
- able to be paid off or written down over time
- amortized adjective
- paid off or spread out over time, as in an amortized loan
Commonly confused: amortization or depreciation?
amortization vs depreciation
Depreciation is the loss of value of tangible assets such as machines, while amortization covers loans and intangible assets.
Practice
A buyer asks for a table showing how each mortgage payment is split between interest and principal. What is it?
Choose one answer.
An amortization schedule breaks each loan payment into interest and principal. Depreciation charts concern physical assets losing value.
Make it your own
Write a sentence using “amortization”, then check it and compare it with the examples above.