Controlled amortization
Asset-Backed Securities glossary · Asset Specific Nuances
Definition
A pay-down schedule in which principal is returned to bondholders on a programmed schedule (common in credit card ABS).
Controlled amortization in plain English
Controlled amortization means paying investors back their original loan amount (the principal) on a fixed, pre-announced timetable, rather than whenever cash happens to trickle in. It's common with credit-card bonds because the underlying card balances get paid off and re-borrowed constantly and unpredictably, so the deal is designed to hand principal back in tidy, scheduled chunks instead. Picture a friend who owes you $1,200 and promises $100 on the first of every month for a year — you know exactly what's coming and when, which makes the bond easier to plan around.
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