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We're the Consumer Financial Protection Bureau (CFPB), a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.

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What is amortization and how could it affect my auto loan?

Answer:

Amortization describes the process of gradually paying off  your auto loan. In an amortizing loan, for each of your monthly payments, a portion is applied towards the amount of the loan – the principal – and a portion of the payment is applied towards paying the finance charge – the interest.

A greater percentage of your monthly payment is applied to interest early in the life of the loan, and a greater percentage is applied to the principal at the end. Thus, the principal balance decreases slowly at first and more quickly closer to the end of the loan term. 

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