In simple words, amortization is the process of paying off a debt over time through regular payments. Each payment covers both interest and a portion of the principal (the original loan amount), which reduces the outstanding balance with time. This method is more common in loans, such as mortgages, allowing borrowers to make predictable monthly payments until the debt is paid off. An amortization schedule shows the breakdown of each payment into interest and principal, helping borrowers understand how much of each payment goes toward reducing their debt.