A fully amortized loan is a type of loan in which the borrower makes fixed payments over a set period of time, and the loan is paid off in full at the end of the term. The monthly payment amount is calculated so that it covers both the interest and principal due on the loan, and the principal balance decreases with each payment. This type of loan is often used for mortgages, car loans, and other long-term loans.
Fully amortized loans are important because they provide borrowers with a clear and predictable repayment plan. The borrower knows exactly how much they will pay each month and when the loan will be paid off. This can help borrowers budget their finances and plan for the future. Fully amortized loans also have the benefit of being less risky for lenders, as the borrower is less likely to default on the loan if they are making regular payments.