Definition of Amortization: What It Means in a Loan

Amortization is the breaking down of loan repayment into small, regular, manageable amounts to be paid over time. With each payment made, a portion of the payment goes toward paying off the interest, while the remaining amount is applied toward paying off the principal. Examples of Minute Loan Center’s amortized loans are installment loans and premier loans.

Minute Loan Center Loan Amortization Definition

When you apply for a Minute Loan Center loan, we amortize your loan payments and prepare a loan repayment schedule for you. It is a straightforward plan showing you when your installment is due and the amount to deposit. From the beginning of your repayment to the end, the installments remain equal, with equal intervals between them to make repayment easier.

What amortization means for a loan is that at the beginning of your repayment, a larger portion of the deposit is applied towards interest, and a smaller portion is used to pay off the loan balance. However, towards the end of the repayment period, the reverse happens: A larger portion of your repayment is allocated towards paying off the principal amount, while the smaller portion goes towards paying off the interest.

Can I Repay My Amortized Loan Early?

According to the definition of loan amortization, repayment is structured to be made in smaller, scheduled amounts. However, at Minute Loan Center, this repayment schedule is not set in stone. You can repay your loan early without incurring any penalties. With loan amortization, paying off your loan early is to your advantage because we calculate the interest on your outstanding principal balance, meaning that the more the principal is paid off, the less interest is due because it’s calculated on a smaller principal amount.

To find out how much you can borrow, apply for a loan today.

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Amortized vs Unamortized Loans

Now that you know the meaning of amortization in loan repayment, how about the alternative: unamortized loans? As you’ve learned, by the definition of an amortized loan, payments on amortized loans are spread throughout the life of the loan to repay both interest and the principal. In contrast, with an unamortized loan, you only pay the interest due at the end of the month and pay back the principal at the end of the draw period.

The unamortized loan payments at the end of the loan term are very high and some people often need to take out another loan to consolidate the old loan. Instead of taking on more debt, it’s better to stick with the relatively high amortized loan monthly payments that are more easily budgeted for, and pay off both the principal and the interest at the same time.

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With clarity about the definition of loan amortization and how amortization works, and with the freedom to repay your loan early without incurring penalties, borrowers are free to apply for Minute Loan Center loans and choose their repayment terms. You may repay the loan comfortably over an extended period or pay it off early. Whichever option you prefer, we’re excited to help you secure a generous loan.

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