What is Amortization?
The process of paying off a loan through scheduled payments split between interest and principal.
An amortization schedule shows, for each payment, how much goes to interest versus principal and the remaining balance. Early payments are interest-heavy; the principal portion grows over time.
Example
On a 20-year loan, after 10 years you've often repaid less than 40% of the principal.
How an amortization schedule works
Amortization is the process of paying off a loan through equal instalments over its term. Each payment covers the interest accrued on the current outstanding balance plus a slice of principal. Because the balance is largest at the start, early payments are mostly interest; as the balance falls, the interest portion shrinks and the principal portion grows, until the final payment clears the loan.
Why early payments barely move the balance
On a typical 20–30 year loan, the first few years' payments are dominated by interest, so the principal falls slowly at first. That is why prepaying principal early — or choosing a shorter term — has an outsized effect on the total interest you pay over the life of the loan.