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What does ‘Amortization’ mean in finance?

Amortization refers to the process of paying off a debt over time through regular payments. In terms of a loan, it’s the spreading of payments over multiple periods, which includes both the principal amount and the interest.

In personal finance, the most common examples would be a 30 year home mortgage, or a 5 year auto loan.

In business lending, amortization can range from bank term loans of 2 years, up to SBA loans which are usually set at 10 years but in some cases can extend even further.

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