In a fixed-rate loan, what does amortization describe?

• A. Amortization means the loan balance stays the same.
• B. Amortization means the monthly payment changes each year.
• C. Amortization means you pay only interest for the first year.
• D. Amortization is the gradual reduction of principal; early payments are mostly interest, later payments mostly principal, with a fixed total payment each month.

Answer: (D)