Final answer:
The amount towards principal increases over time because as the loan balance decreases, there is less interest accruing, allowing more of the payment to go towards the principal due to the process of amortization. The correct option is (C).
Step-by-step explanation:
The reason the amount towards principal increases as time goes on in a typical installment loan (like a mortgage or an auto loan) is due to the nature of how the payments are structured.
Initially, when the balance is higher, a larger portion of the payment goes towards interest. As the principal balance decreases over time, there's less balance to accrue interest on, so more of your payment goes towards paying down the principal. This is known as amortization.
In other words, as you keep making payments over time, you end up owing less interest because the principal amount - which is what the interest is calculated on - gets smaller with every payment that includes a principal component.
As a result, a bigger slice of your payment goes towards reducing the principal balance itself.