An amortized loan is a type of loan where the principal of the loan is paid down over the life of the loan according to an amortization schedule, typically through equal payments. Each payment to the lender consists of a portion of interest and a portion of principal. The calculations for an amortizing loan are those of an annuity using the time value of money formulas and can be done using an amortization calculator.

Key features of an amortized loan include:

• Amortization Schedule: This shows how the borrowers payments are broken down over the life of the loan. The majority of the payments for the first few years of the loan go to interest, while later on, the scale slowly tips the other way until nearly the entire payment goes towards paying off the principal.

• Interest and Principal: An amortized loan requires the borrower to make scheduled, periodic payments that are applied to both the principal and interest. The payment first pays off the relevant interest expense for the period, after which the remainder of the payment is put towards reducing the principal amount.

• Fixed Payments: An amortized loan has fixed, periodic payments that do not vary from month to month. The math works out the ratio of debt and principal payments each month until the entire debt is paid off.

Amortized loans can be easier to manage than non-amortizing loans or other types of debt because borrowers have a clear idea of when they will pay off the loan. Common examples of amortized loans include auto loans, home loans, and personal loans from a bank for small projects or debt consolidation.