An amortized loan requires a borrower to repay parts of the loan amount over time. Almost all consumer loans are amortized loans. Amortizing a loan is the process of providing for a loan to be paid off by making regular principal deductions. There are generally two ways for amortizing a loan. One way is to repay in equal instalments. But the composition of principal and interest is varying in each period. The other way involves repaying an equal amount of principal plus a varying amount of interest in each period. This approach is common with medium-term business loans. For example, a four-year loan of $50,000 with annual interest rate of 8% has the following schedule based on the first way of equal instalments: