noun
amortization
am-er-tuh-ZAY-shun/ˌæmərtəˈzeɪʃn/
The gradual accounting reduction of a debt or asset cost over time.
The loan's amortization schedule shows the balance declining each month.
Etymology
The underlying verb meant to deaden or extinguish. Applied to debt, that image became its financial extinction: scheduled repayments gradually eliminate the obligation.
In context
how we pay that unfunded liability off is through a process called amortization which is a fancy word for saying that this is a way that you pay off a balance of a debt with interest through regular payments
More examples
- The accountant records amortization of the software license's cost.
- Faster amortization would reduce the outstanding debt sooner.
- The report separates amortization from the initial cash payment.
Forms
amortize verb — To spread repayment or cost recognition over time.
Similar words
- repayment
- Can happen all at once rather than gradually.
- depreciation
- Usually concerns allocating tangible assets' costs rather than intangible ones.