Amortization is the mathematical schedule by which a loan is paid off. For fixed-rate mortgages and auto loans, your monthly payment remains exactly the same for the entire life of the loan.
However, internally, the bank allocates your payment differently each month. In the early years of the loan, the majority of your payment is applied to interest. In the later years, the majority is applied to principal.
Why It Matters
Because interest is front-loaded on an amortization schedule, making extra principal payments early in the loan has a massive compounding effect on your interest savings.