Describing a loan or payment structure where each payment reduces both the interest owed and the principal balance, gradually paying down the debt over time. This creates a predictable schedule where the loan balance decreases with each payment until it reaches zero.
From Old French 'amortir' meaning 'to kill' or 'to deaden,' which derives from Latin 'ad mortem' (to death). In medieval times, it referred to transferring land to the 'dead hand' of the church. The financial meaning of 'killing off' debt gradually developed in the 18th century.
The word literally means 'killing' your debt bit by bit - how's that for dramatic financial terminology! Unlike interest-only loans, amortizing loans are designed to actually eliminate your debt, which is why your early payments feel like they barely make a dent (most goes to interest initially).
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