When you have a mortgage, car loan, or other consumer loan, you pay the loan off over a set period of time and this is called amortization.  Amortization is derived from the Latin word meaning “to kill”, so the word implies you pay on the loan until you kill it off. Each monthly debt payment includes a portion that goes to interest and a portion that goes to the principal, or remaining balance of the loan. Typically, each successive payment applies more money to the principal and less money to the interest as the loan balance decreases.

Refinancing a loan is a way to take advantage of a lower interest rate or to consolidate multiple loans into one. Be sure to account for any charges or fees imposed by the lender when considering refinancing a loan. These fees may lessen the impact of a lower interest rate.

Find Out More with MyMilitarySavings.com and Finance!