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Are annuity and amortization the same?

No! Annuity and amortization are two different financial processes with annuity being a commercial product to grow money, and depreciation is systematically repaying a debt to reduce the principal over time.

Annuity and amortization are monthly or periodic payments to pay back in the future for annuity and to clear off the mortgage loan principal in depreciation.

An annuity is paid for a specific period or in onetime payment to get monthly returns from until death. Elderly persons usually take it by paying a lump sum amount to the annuity provider, who, in turn, pays back the fixed amount monthly to the owner who paid the amount.

For example, a person has paid $100,000 at the age of 65 to receive a monthly $500 until death. For others who pay monthly $ 500 from the age of 65 up to the age of 70 to reach the $ 100,000 amount, he or she will receive a monthly $ 500 from 70 years of age.

Either way, the person will receive his or her capital amount at the age of 82 and then will make profits by continuously receiving $500 until death. There are many annuity products available as per many terms depending on the amount, age, and others. An annuity provides financial support at an older age, and amortization reduces the principal to zero after some time. Hence, though, both are financial products but are different in their purpose and persons they intend to serve.

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