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What is amortization?
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Answer Posted / sanjeev joshi
A periodic payment plan to pay a debt in which the interest
and a portion of the principal is included in each payment
by an established mathematical formula. Most commonly it is
used on a real property loan or financing of an automobile
or other purchase. By figuring the interest on the
declining principal and the number of years of the loan,
the monthly payments are averaged and determined. Since the
main portion of the early payments is interest, the
principal does not decline rapidly until the latter stages
of the loan term.
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