Amortization:
The process of paying off the loan in regular payment intervals over the duration of the loan term. Each payment consists of a principal and interest payment. The loan balance gradually decreases with each payment made. The payment details shows the breakdown of the amount of principal and interest that comprise each payment, as well as the balance of the loan that is outstanding at the end of the period. The ending balance is based on the amount of principal paid off during the period. Loans are structured such that at the beginning of the loan term, principal payments will be small relative to interest payments, but increase over the duration of the loan. Interest payments will be large relative to principal payments at the beginning, but decrease over the duration of the loan.