Amortize
/əˈmɔːrtəˌraɪz/
verbB2
Definition
Amortize means to slowly reduce the amount of money you owe by making regular payments over a period of time. It is often used when talking about loans or debts, where each payment lowers the total amount owed a little bit at a time until it is fully paid.
Was this helpful?
See It in Action
To pay off a debt in regular small parts over time
- •They amortize their car loan by making monthly payments.
- •The company amortizes its large loan over 10 years.
- •You should amortize your mortgage to avoid big payments at the end.
To gradually write off the cost of an asset over time in accounting (less common outside business)
- •The business amortizes the cost of its equipment over five years.
- •Amortizing helps the company spread the cost of expensive items.
Make It Stick
- ✓Think of "amortize" like "pay" (A1 word), but spread out over many small, regular payments instead of all at once
- ✓Picture a big cake being cut into many small slices and eaten slowly over days, not all at once
- ✓It’s the feeling of relief when you see your debt getting smaller step by step after each payment
- ✓Sounds like "a-MORE-tize" → imagine paying a little MORE each time until the debt disappears
- ✓Think of a mortgage (house loan) where you pay a little money every month to reduce the total loan slowly
- ✓NOT like "borrow" (which means to take money), amortize means to pay back money little by little
- ✓NOT like "pay off" all at once; amortize is slow and planned over time
- ✓NOT like "save" money; amortize is about reducing debt, not putting money aside
Try Other Words
- •Repay: to give back money owed (Use when focusing on the act of returning money, but not necessarily in small parts)
- •Pay off: to finish paying a debt completely (Use when the debt is fully paid, not gradually)
- •Spread payments: to divide payments over time (Use when emphasizing the timing and division of payments)
Unboxing
- •Prefix "a-" (a form of "ad" meaning "to" or "toward") + root "mort" (from Latin "mors," meaning death) + suffix "-ize" (to make or do)
- •Origin comes from Latin "amortire," meaning "to kill" or "to extinguish" a debt (like "kill" meaning to end)
- •Historically, it meant to end or reduce a debt completely by regular payments
- •Today, used in finance to describe paying debts or costs little by little until gone
- •The root "mort" relates to death, so amortize means to "kill" the debt slowly over time
Reflect & Connect
•How does amortizing a loan help people manage their money better compared to paying all at once?
•Can you think of situations in life where "amortizing" could be a useful idea outside money or loans?
Fill in the blanks
1.To avoid large payments at once, many people amortize their mortgage by paying ___ amounts every month over many years.
2.When you amortize a loan, each payment ___ both the interest and the original amount you borrowed.
3.Amortize is different from simply paying because it means spreading payments ___ a long period.
4.Companies amortize the cost of equipment to show expenses ___ over several years, not all at once.
5.If you want to finish your loan faster, you can pay more than the usual amount to ___ the amortization period.
6.Amortize usually involves a ___ schedule of payments, not random or one-time payments.
7.From the word's origin, amortize means to slowly "___" or end the debt by regular payments.