Long-Term Debt

• Long-term debt is typically any debt that lasts longer than one year. If the borrower does not pay off the debt in a year, it is considered long term from an accounting perspective. Many different bonds and other security notes, are long term. Other types of loans, often made by large lenders for major business undertakings, are considered long-term loans because of the time invested in the project and the years it takes to pay the loan off.
  
  

Interest Rates

• Interest rates are an integral part of loans and most important for long-term loans that will come due at a period years in the future. The interest shows how much extra, per term, must be paid on the loan to the lender for the service of providing the loan in the first place. It is how lenders make money. Long-term loans tend to have a lower interest rate, but rates differ according to market conditions and situations.
  
  

Amortization

• Amortization is the process of spreading payments out according to how they will be paid. This divides the entire payment up into different parts based on how often payment will be made and how long they will be made for. Technically, amortization can apply to any period of time in which periodic payments or deductions will be made, but most people associate amortization with loans.
  
  

Amortizing Loans

• When a loan is amortized, the amortization schedule includes not only the original amount of the loan, but also all interest payments. Long-term amortized loans combine both interest payments and principal loan payments into one payment every term, usually every month. This one payment is part interest, part principal, although on many loans, the interest is front-loaded, meaning initial payments are mostly interest and cover very little of the principal. The goal is amortizing the loan out through its life while including the rising costs of interest.
  
  

Variable Rates

• Amortization schedules can be made accurately as long as there is a fixed interest rate on the loan. If the rate is variable, then there is a chance it could change every term. If the rate changes, the entire amortization schedule must change in order to recalculate the payments. Variable rate loans are subject to frequent amortization changes.