The process of gradually paying off a debt through regular payments that cover both principal and interest, or spreading the cost of an intangible asset over its useful life. Each payment reduces the outstanding balance until the debt is fully repaid.
From Medieval Latin 'amortizare' meaning 'to kill' or 'put to death,' literally referring to the 'killing off' of debt. The term evolved from Old French 'amortir' and entered English financial vocabulary in the 14th century to describe the systematic elimination of obligations.
Amortization literally means 'bringing to death' - you're systematically killing your debt! The beautiful math behind it means early payments are mostly interest while later payments attack the principal, which is why paying extra early has such dramatic effects on total interest paid.
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