Understanding Loan Payments and Amortization

What does "amortization" mean for a loan?

• It means you pay extra fees.

• It means you pay off the loan over a set time.

• It means your loan gets bigger.

• It means you get a discount.

What two parts make up each payment you send to your lender?

• Taxes and insurance.

• Interest and principal.

• Fees and charges.

• Savings and investments.

When you make loan payments over time, how does the amount of interest you pay each month change?

• It stays the same.

• It slowly goes down.

• It slowly goes up.

• It stops completely after the first payment.

What is a benefit of paying extra money on your loan each month?

• You will get a higher interest rate.

• You will pay off the loan faster and save money on interest.

• You will have to pay more taxes.

• You will get a new loan.