Amortization is the repayment of a loan. It is usually used in conjunction with a time frame. For example, a 30 year loan term amortizes over a 30 year time frame.

The longer the term is for a loan the slower it amortizes. This slower amortization means a lower monthly payment. It can also mean more interest paid out over the life of the loan.

A typical loan payment involves two components:

part of it is the interest payment,
and part of it paying off the principal

A constant payment on a 30 year fixed loan term amortizes each month over a period of 360 months. This is normal amortization.

Amortization can also work in reverse. Minimum payment option loans, such as