Trying to make sense of the difference between installment and amortization. They seem to be used interchangeably in some places but to me it seems like amortization should be amount that you pay off your actual loan, while installment refers to the whole sum of your amortization + interest + bank charges.

As a bonus question, is a repayment on a loan the same as amortization or installment?

3 Answers 3


Both are different things. Installment is what you pay to cover your mortgage or loan. Then comes in amortization. When you pay your installment, a part of it goes to bear the interest and one part of it covers up the principal you own. The reducing of the principal by the amount paid is amortization. So your principal is amortized over the whole period during which you pay your loan in installments.


According to wikipedia, amortization is the process through which your loan principal decreases over the life of your loan.

An installment is a single, usually monthly, payment that includes principal repayment and interest.

The amortization schedule determines how many installments are needed to pay off the loan in full, how much of each payment is interest and how much of each payment will go towards the principal.

The repayment of a loan is the sum-total of all installments paid.

(This answer will for now ignore the question of whether "installment" should refer only to the scheduled payments or if any payment, including additional payments, can be called installments as well)


If you have a 30 year mortgage at 6% for $100,000, you pay 360 monthly installments of $600 to repay the loan.

The amortization is the rate at which the installments are extinguishing the debt. When you first start making payments, the majority of each $600 payment is interest (aka profit for the bank). Conversely, the final payments are almost entirely principal payments.

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