The payment made each period on an amortized loan is constant, and it consists of some interest and some principal.The closer we are to the end of the loan's life, the greater the percentage of the payment that will be a repayment of principal.

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This statement is true for most amortized loans. As the loan nears its end, the remaining balance is smaller, so the interest portion of the payment decreases, while the amount that goes towards paying down the principal increases. This is called "amortization," which means that the loan is being paid off in regular installments over a set period of time.

The Payment Made Each Period on an Amortized Loan Is