====== Amortization ======

**Amortization** is the process of **gradually paying off a loan** through **regular payments** that cover both **interest and principal**, so the loan is **fully paid at the end of the term**.

===== Key Characteristics =====
  * Each payment includes **interest + principal**
  * Early payments are mostly **interest**
  * Later payments are mostly **principal**
  * Loan balance **decreases over time**
  * A fully amortized loan has a **zero balance at maturity**

===== What You Need for Exam Calculations =====
  * **Loan amount (principal)**
  * **Interest rate**
  * **Loan term** (years)
  * **Payment amount** (if provided)
  * **Number of payments made** (to find remaining balance)

===== Common Exam Scenarios =====
  * **No payments made**
    * Loan balance = original loan amount

  * **Some payments made**
    * Loan balance = original loan amount − principal paid
    * (Interest paid does **not** reduce balance)

  * **Fully amortized loan**
    * Balance = $0 at end of term

===== Key Formula Concepts (Exam Use) =====
  * **Monthly payment** is fixed
  * **Interest portion** = loan balance × periodic interest rate
  * **Principal portion** = payment − interest portion
  * **New balance** = old balance − principal portion

===== Exam Tip =====
  * Payments **do not equal principal reduction**
  * Only the **principal portion** builds equity
  * If the problem says **no payments were made**, ignore interest and amortization details