Amortized Loan

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DEFINITION of 'Amortized Loan'

A loan with scheduled periodic payments of both principal and interest. This is opposed to loans with interest-only payment features, balloon payment features and even negatively amortizing payment features.

INVESTOPEDIA EXPLAINS 'Amortized Loan'

Borrowers who choose amortized loans are less likely to experience "payment shock" than borrowers who choose loans which are not fully amortized. Payments on loans that are not initially fully amortized must at some point become amortized over the remaining term of the loan in order to repay the outstanding principal balance. The shorter the remaining term, the larger the increase required in the periodic payments to amortize the loan over the remaining term.

RELATED TERMS
  1. Amortization Schedule

    A complete schedule of periodic blended loan payments, showing ...
  2. Negatively Amortizing Loan

    A loan with a payment structure that allows for a scheduled payment ...
  3. Payment Shock

    The risk that a loan's scheduled future periodic payments may ...
  4. Fully Amortizing Payment

    A periodic loan payment, part of which is principal and part ...
  5. Negative Amortization

    An increase in the principal balance of a loan caused by making ...
  6. Negative Amortization Limit

    A provision in certain loan contracts that limits the amount ...
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