Amortized definitions
| Word backwards | dezitroma |
|---|---|
| Part of speech | The word "amortized" is a verb. |
| Syllabic division | a-mor-tized |
| Plural | The plural of the word "amortized" is "amortized." |
| Total letters | 9 |
| Vogais (4) | a,o,i,e |
| Consonants (5) | m,r,t,z,d |
Amortized, in the context of finance, refers to the process of spreading out the cost of a loan or an investment over a certain period of time. This allows for the repayment to be made in periodic installments, rather than in one lump sum.
Amortized Loans
Amortized loans are common in mortgages, car loans, and other types of financing. The borrower makes regular payments that cover both the principal amount of the loan and the interest that accrues over time. These payments are calculated to ensure that the loan is fully repaid by the end of the term.
Amortization Schedule
An amortization schedule is a table that displays each payment made towards an amortized loan. It breaks down how much of each payment goes towards the principal balance and how much goes towards interest. Over time, the balance of the loan decreases as more of the principal is paid off.
Amortization vs. Depreciation
While amortization is the process of reducing a financial obligation over time, depreciation is the reduction in the value of an asset over time. Both concepts involve spreading out costs, but amortization deals with financial liabilities, while depreciation deals with physical assets.
In conclusion, understanding how amortized loans work can help individuals make informed decisions about borrowing money and managing their finances. By spreading out the cost of a loan over time, borrowers can budget more effectively and avoid financial strain.
Amortized Examples
- The cost of the new equipment will be amortized over five years.
- The mortgage payment includes both principal and interest, amortized over 30 years.
- The software development costs will be amortized as an expense over the next two years.
- The upfront fee for the gym membership can be amortized on a monthly basis.
- The company decided to amortize the cost of the marketing campaign over multiple quarters.
- The car loan is amortized with monthly payments over a period of five years.
- The prepaid rent will be amortized evenly over the course of the lease term.
- The intangible asset will be amortized over its estimated useful life.
- The cost of the building renovations will be amortized over 15 years.
- The company chose to amortize the patent costs over a 10-year period.