Amortization is a term that often appears when we refer to a loan or the recovery of an investment made. It is a term used in finance and accounting to denote the payment of a debt or the reimbursement of an investment. This term accounts for the depreciation of a good, that is, something that is devalued over time. An explanation over at http://palehorseandrider.com
Repayment is the process of payment of the debt by the borrower, in other words, the client.
As it is familiar to us, in the loan payment certain interests are included that report financial compensation to the lender for the service. These interests vary according to the conditions of the loan and several factors, including the purpose for which the loan serves.
The action of paying a debt by paying the installments is what is known as amortization. The amount paid in each payment period (month, quarter, etc.) may be the same or different depending on the payment system that is followed. Among the main systems is the French, which determines a fixed fee, the German, according to which interest and fees fall over time and the American, which determines the payment of interest for the duration of the loan and a single payment of the capital at the end of that duration.
Each of the systems described is designed to meet different customer needs. The usual system in Spain is French but there may be cases in which the other systems are used. This depends on the type of loan in question, that is, the purpose for which the money will be used and the guarantees that the lender has. Understanding how the loan system works allows you to be better able to make a decision before requesting one.
The amortization guarantees
The company or an entity will receive financial compensation once the payment of a loan has been completed. Otherwise, if the debt is not amortized by charging the interest rate on it, the result would be a loss of money since the time that the borrowed capital has been immobilized in the hands of the client implies that it is not invested or used for other purposes. in the company or lender. advertisements
That is why the interests are included in all the loans we request. Otherwise, it would not be profitable for banks or, in general, lenders to grant such services.
This is an entry on a series of articles related to the generalities and characteristics of loans and credits where we try to bring the user information that we consider of great interest before applying for any of the types of loans that exist in the financial market.