Finance
The process of paying off a loan through regular scheduled payments of principal and interest is called:
AAmortization✓ Correct
BCapitalization
CDepreciation
DHypothecation
Explanation
Amortization is the process of gradually paying off a debt through regular installment payments that include both principal and interest, with the interest portion decreasing over time.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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