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

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In the early years of an amortized loan, a higher percentage of the payment goes towards interest, and as the loan matures, the proportion shifts so that a larger percentage of the payment goes towards reducing the principal.

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