When a loan is amortized, a relatively low percentage of the payment goes to reduce the outstanding principal in the early years, and the principal repayment's percentage increases in the loan's later years.

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This is because the interest component of the payment is higher in the early years of the loan, and as the outstanding principal amount reduces over time, the interest portion of the payment reduces, allowing for a higher percentage of the payment to be applied towards reducing the principal.

When a Loan Is Amortized, a Relatively Low Percentage of the Payment