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The gradual reduction of a debt or intangible asset value over a set period through scheduled payments or write-downs.
In lending, amortization refers to spreading loan payments over time so that both principal and interest are paid off by the end of the loan term. A 30-year mortgage is a classic example: early payments are mostly interest, while later payments are mostly principal. In accounting, amortization refers to expensing the cost of intangible assets (like patents or goodwill) over their useful life, similar to how depreciation works for physical assets.