Amortizing is a financial term that is commonly used in the world of accounting, finance, and investing. It is a process of paying off a debt over a period of time through regular payments that include both principal and interest. In this article, we will explore the definition and meaning of amortizing, its origin, and its significance in different contexts.
Definitions
Amortizing refers to the process of paying off a debt in regular installments over a specific period of time. These payments are structured in a way that includes both the principal amount and the interest that accrues on the debt. The term amortizing can also be used to refer to the decrease in the value of an asset over time, such as a patent or a copyright.
Origin
The word amortizing is derived from the Latin word “amortire,” which means “to kill” or “to extinguish.” The term was first used in the 16th century to describe the process of paying off a debt over time. The concept of amortization has been used in various forms throughout history, including in the construction of large public works projects such as bridges and highways.
Meaning in different dictionaries
According to the Merriam-Webster dictionary, amortizing is defined as “to pay off (an obligation, such as a mortgage) gradually, usually by periodic payments of principal and interest or by payments to a sinking fund.” The Oxford English Dictionary defines amortizing as “to reduce (a debt) by means of regular payments of principal and interest.”
Associations
Amortizing is often associated with long-term loans, such as mortgages and car loans. It is also used in accounting to describe the process of allocating the cost of an asset over its useful life. In the context of investing, amortizing is used to describe the gradual reduction in the value of an asset over time.
Synonyms
Some synonyms of amortizing include paying off, reducing, liquidating, and retiring.
Antonyms
Some antonyms of amortizing include borrowing, lending, and accruing.
The same root words
Some words that share the same root as amortizing include mortgage, mortuary, and morbid.
Example Sentences
- John is amortizing his car loan over a period of five years.
- The company is amortizing the cost of the new computer system over the next three years.
- The value of the patent is being amortized over its useful life of 10 years.
- The mortgage payment includes both principal and interest, which are being amortized over 30 years.
- The company is amortizing the cost of the new building over the next 20 years.