Origin: Latin suffix -tion
Amortization has 3 different meanings across 1 category:
the reduction of the value of an asset by prorating its cost over a period of years
"The company recorded depreciation as amortization to spread the computer server's initial purchase price across its five-year useful life."
payment of an obligation in a series of installments or transfers
"The company structured the loan repayment so that the principal and interest were handled through monthly amortization payments."
The reduction of loan principal over a series of payments.
"The monthly mortgage payment includes both interest and amortization, which gradually reduces the amount owed on the house."
In plain English: Amortization is the process of paying off a debt little by little through regular payments over time until it's gone completely.
"The company's annual report shows that their mortgage amortization schedule is working ahead of plan."
Usage: Amortization specifically refers to the gradual repayment of a debt through regular installments that cover both interest and principal, rather than just paying down an asset's value or spreading costs over time in accounting contexts. Use this term when discussing how loans are paid off completely by a set date, distinguishing it from general depreciation which applies only to non-monetary assets losing value.
The word entered Middle English as "amortisen," meaning to kill or alienate property in perpetuity. It ultimately derives from the Latin root for death, reflecting its original sense of extinguishing rights rather than just financial depreciation.