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With a fixed monthly payment, the interest portion is calculated on the outstanding balance each month. Early on the balance is high, so most of your payment goes to interest. As the balance falls, the interest portion shrinks and more goes toward principal — this is amortization. Front-loaded interest is not a bank trick; it's arithmetic.

The monthly payment isn't picked at random — it's the single amount that, paid every month, drops the balance to exactly zero on the final payment. The principal, interest rate, and number of months fully determine it through the annuity formula. The practical takeaway: stretching a loan over more years lowers each payment but raises the total interest you pay, because your money is borrowed for longer.

The word amortization comes from the Latin ad mortem, "to death," via the Old French amortir, "to kill." An amortizing loan is a debt you slowly put to death, payment by payment, until the balance is dead at zero. The same root gives us mortgage — literally a "death pledge," because the pledge dies the moment the debt is paid off.