What is Amortization?

Amortization is used every occasion when the borrower pays back his loan on a predetermined basis. This repayment option has to cover the principal as well as the interest rate. Also it can be used in different context, for example your a traveling salesman and you buy a car for £50.000 and the car's lifetime is 20 years so the amortization rate should be £2500 each year. Of course the amortization rate can be faster then you end up in profit.