Amortisation describes how a business loan is paid off in steady instalments across its agreed term, so the balance reduces to zero by the end. Each repayment is split between the interest due for that period and a portion of the original amount you borrowed (the principal).
How it works in practice
In the early part of a loan, a larger share of each repayment tends to go towards interest, because the outstanding balance is at its highest. As the balance falls, more of each repayment goes towards clearing the principal. This is normal and is set out in your repayment schedule.
- Your offer shows the term and the repayment pattern agreed for your company.
- An amortisation schedule lists each repayment date and how the balance reduces.
- Paying down faster, where your agreement allows, reduces the interest you accrue.
Why it matters for your company
Understanding amortisation helps you plan cash flow with confidence, because you can see exactly when the loan will be cleared. It also makes it easier to compare the true cost of borrowing rather than focusing on a single instalment.
Credicorp lends only to UK limited companies and LLPs for business purposes. If you would like a copy of your amortisation schedule, you can view it in your account or ask our team.
See also: Glossary: amortisation, What is a term loan?, What is an overpayment?.