Amortization is the process of gradually writing off the initial cost of an asset over a specific term or the repayment of debt in installments.
An amortization schedule details the specific payments required to repay a loan, providing clarity on the principal and interest components of each payment over the entire term of the loan.
Amortization term refers to the time it takes to retire a debt through periodic payments. It is usually associated with loans and mortgages, indicating the full duration over which regular payments are made to fully repay the debt.
A loan in which the repayment is made in more than one installment, as opposed to a bullet loan where the repayment is made in a single lump sum at the end of the term.
Annual Debt Service refers to the required annual principal and interest payments for a loan. In corporate finance, it is the cash required in a year for payments of interest and current maturities of principal on outstanding debt.
A balloon payment is a large, one-time payment made at the end of a loan term that is significantly larger than all previous payments. Often seen in both commercial and residential real estate financing, balloon payments also apply to business and personal loans.
A balloon payment is a large sum repaid as an irregular installment in loan repayment, often seen as the final payment in loan structures where it is significantly larger than previous regular payments.
A co-borrower is an additional person who is responsible for repaying a loan and is listed on the loan agreement alongside the primary borrower. Both borrowers are equally liable for the debt.
A co-mortgagor is an individual who signs a mortgage contract with another party and is jointly obligated to repay the loan. This person typically helps in meeting the loan requirements and gains a share of ownership in the property.
COD is a versatile acronym used in finance and business, referring either to 'Cash on Delivery' or 'Cancellation of Debt.' Cash on Delivery is a transaction method where the buyer pays for goods upon receipt, while Cancellation of Debt involves forgiveness of a borrower's obligation to repay a loan. This article will explore both definitions in detail.
Collateral assignment is the designation of a policy's death benefit or its cash surrender value to a creditor as security for a loan. If the loan is not repaid, the creditor receives the policy proceeds up to the balance of the outstanding loan, and the beneficiary receives the remainder.
Standards established by creditors that must be satisfied by potential debtors in order for credit to be given, typically reflecting the applicant's ability to repay the loan or make payments for goods or services acquired.
A demand loan is a type of loan that must be repaid upon the lender's request, rather than on a predetermined date.
Group Credit Insurance is a coverage issued to a creditor on the lives of multiple debtors for outstanding loans. In the event of a debtor's death before repayment, the policy pays the remaining loan amount to the creditor. This type of insurance contract covers an entire group of debtors instead of individual policies for each debtor.
A home loan, also known as a mortgage, is a financing arrangement in which an individual borrows money from a financial institution to purchase residential property.
A level-payment mortgage requires the same payment each month or other period to achieve full amortization over the loan term. This structure provides predictability for borrowers regarding monthly expenses.
Loan amortization refers to the reduction of debt by scheduled, regular payments of principal and interest sufficient to repay the loan at maturity. It is a fundamental concept in financial planning, allowing borrowers to understand how their loan is repaid over time.
Negative amortization is an increase in the outstanding balance of a loan resulting from the failure of periodic debt service payments to cover the required interest charged on the loan.
A negotiable note is a record of an unsecured loan, with the term 'note' preferred over 'bond' for principal sums repayable in less than five years.
PITI is an acronym representing the four primary components that make up a borrower's monthly mortgage payments: Principal, Interest, Taxes, and Insurance. Understanding PITI is crucial for both lenders and borrowers to ensure accurate financial planning and loan repayment.
A prepayment clause is a provision in a bond or mortgage that allows the borrower to pay off the loan before its scheduled due date. In some cases, there may be penalties for prepayment, such as the waiver of interest that is not yet due.
