What feature characterizes a fixed rate fully amortized loan?

A fixed-rate fully amortized loan is characterized by consistent monthly payments with a fixed interest rate throughout the life of the loan, which allows borrowers to have predictable payment amounts. In this type of loan structure, each monthly payment consists of both principal and interest.

As payments are made over time, a larger portion of the monthly payment is applied toward the principal balance while a smaller portion is used to cover the interest on the loan. This happens because the interest amount is calculated based on the remaining principal, which decreases as it is paid down. Thus, as the loan matures, borrowers notice that while the fixed payment amount stays the same, the division of that payment between principal and interest shifts so that more goes toward reducing the principal balance with each successive payment. This gradual increase in the amount applied towards the principal each month is what characterizes a fully amortized loan, ensuring that the entire loan will be paid off by the end of the term if all payments are made as scheduled.