The gradual reduction of a debt or amount over a period of time. A loan amortization schedule details periodic payment and remaining balance over the duration of a loan. The longer the amortization period, the larger the total interest on the debt and the smaller the amount of each installment.
A stream of payments where equal payments are made at regular intervals. The annuity contract is usually made with an insurance company that pays the purchaser.
Balloon, Expiration, Maturity, Term:
A loan's balloon, expiration, maturity or term refers to a time at which the the loan commitment ends or the duration of the loan. All accrued interest and remaining principal are due at this time.
Any amount of money that is received or paid over a specified period of time.
Deposits issued by banks with a specific interest rate and maturity date. CDs are transferable.
A method of computing interest where the interest in each is added to the principal amount.
The process of determine the future value of an amount of money; it is the inverse of discounting. Compound interest occurs when interest paid in the first period is added on the the principal and during the second period, interest is earned on the original principal plus the interest earned during the first period.
A method of compounding where the number of compounding periods approaches infinity.
The process of bringing a future value of an amount back to its present value; it is the inverse of compounding. The effect of interest whereby the present value of a payment or a stream of payments is less than the future payment(s).
A loan that finances specific items of inventory.
What an amount of money today will be worth at a specific point in time in the future.
A sum of money paid for the use of another amount of money called the principal. It is the cost of borrowing or lending money, expressed as a percentage paid or received in a given year.
A mean of measuring the relationship between present value and future value of money in terms of a growth rate per year, expressed as a percentage. It is a percentage charged to a borrower.
Internal Rate of Return (IRR):
A mean of measuring yield which assumes the same reinvestment rate of all the cash flows. The rate of return of an investment determined through the use of the present value formula.
London Inter bank Offered Rate. The rate at which banks lend money to one another. The LIBOR rates are the benchmark risk-free short term interest rate.
A loan facility allowing the borrower to draw and repay funds up to s specified amount at his or her discretion.
The ratio of a loan balance to the collateral of the loan.
The pledging of property by a borrower to a lender as security for the payment of a debt. It is a mean by which a lender takes real estate as collateral for a loan.
The contract signed by the lender and the borrower to establish a loan.
A person who signs a note and therefore becomes liable to repay the debt.
A point is a fee paid in advance for a loan commitment. One point is equivalent to one percent of the loan commitment.
Payment of principal in advance of its scheduled payment date.
The present value of an amount of money is how much a given future sum is worth today. The current value of a payment or stream of payments to be made in the future.
The original amount of a loan or the portion of the original amount that remains unpaid.
Principal and Interest Payment:
A loan payment amount including both principal and interest that remains the same over the duration of the loan.
Principal plus Interest Payment:
A loan payment where the principal portion is fixed. The total amount of each payment is less than the previous payment since the interest is calculated on the amount of principal remaining.
A method of computing interest where the interest payment for the year is the principal amount multiplied by the interest. (The interest on $1,000 is $70 if the interest rate is 7%)
A loan where the entire principal and interest amount is due in one payment at the maturity date.