What is amortisation on a business loan?

2 min read

Level paymentSame each period

Interest firstFront-loaded

Zero at endFully repaid

What it means

An amortising loan is repaid in equal instalments. Each payment splits between interest (charged on the outstanding balance) and capital. Because the balance is highest at the start, early instalments are weighted towards interest; as the balance falls, more of each payment clears capital. By the final instalment the loan is fully repaid — unlike an interest-only or balloon structure.

What this means for your company

Amortisation makes budgeting easy — the payment is the same every period. See exactly how yours splits with the repayment calculator. It also explains why settling early saves less interest than you might expect near the end: most of the interest was paid up front. On genuine short-term facilities the effect is smaller because the term is short.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

Why is early-term interest so high?

Interest is charged on the outstanding balance, which is largest at the beginning. So early instalments carry more interest and less capital. It is not a penalty — just how balance-based interest works.

Is amortisation the same as depreciation?

They are cousins. Amortisation spreads the cost of an intangible or a loan over time; depreciation spreads the cost of a physical asset. In loan terms, amortisation means paying down the balance.