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Amortization system

An amortization system is the way in which a loan is repaid and how the loan payments are distributed.

The amortization system determines which part of the loan installment will be used to repay the principal and which part will be used to repay the interest.

There are different amortization systems and the most commonly used are the German or variable-installment system and the French or fixed-installment system, as well as the American system.