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A loan’s AMORTIZATION period is the amount of time over which the loan’s payment is calculated.
In this industry it is common for loans to have a “split amortization”, meaning that the loan’s term and amortization periods are different (Amortization Period being greater than or equal to the Term, never less). For the borrower, this creates the benefit of lowering payments (better cash flow) and allows for additional leverage.
Your TERM is the length of time your loans contract is actually in effect.
-If the term is equal to the amortization; your loan will generally have been paid in full after this period of time.
-If the amortization is greater than the term: at the end of the term, you will have the option to renew your loan based on the lower principle balance and rates offered at that time.
Sometimes called a “balloon payment”, this refers to the one-time payment at the end of the loan’s term.
If the amortization period exceeds the term, this represents the principal borrowed and still remaining due at the end of the loan’s term. If the amortization period and term are the same this represents your final debt payment.