Amortizing Loan
Corporate Credit Analysis glossary · Corporate Credit Analysis
Definition
A loan whose principal is repaid in scheduled installments over the life of the loan, in contrast to a bullet maturity. Term Loan A facilities are commonly amortizing; Term Loan B facilities have only minimal mandatory amortisation.
Amortizing Loan in plain English
When you borrow money, the 'principal' is the actual amount you owe (separate from interest, the fee for borrowing). An amortizing loan means you chip away at that principal a bit with every scheduled payment, like paying off a phone in monthly installments so the balance steadily shrinks to zero. The opposite is a 'bullet' loan, where you pay only interest along the way and then owe the whole lump sum at the very end. In corporate lending, 'Term Loan A' deals usually amortize (steady paydown), while 'Term Loan B' deals barely pay down principal until the end, keeping more cash in the borrower's pocket meanwhile.
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