What characterizes an amortized loan?

An amortized loan is characterized by a repayment structure where regular payments are made throughout the life of the loan, and these payments consist of both principal and interest components. This means that each payment reduces the outstanding balance of the loan, which is different from other loan structures where the principal might only be paid back at the end or where only interest payments are made initially.

In an amortized loan, the payments are typically calculated so that by the end of the loan term, the entire principal plus interest is fully paid off. This helps borrowers manage their cash flow, as they make predictable payments over time rather than facing a large lump sum payment at the end. Thus, option B accurately describes the nature of amortized loans, highlighting the systematic approach to both principal and interest repayment.