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

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.