Overview of Wall Street Journal Prime Rate The prime rate is based on the federal funds rate, which is set by the Federal Reserve. The Federal Reserve uses the federal funds rate to control the supply of money in the economy and to influence interest rates. The Wall Street Journal … …
Variable Interest Rate: Definition, Pros, Cons A variable interest rate is a type of interest rate that can change over time. Unlike a fixed interest rate, which remains the same throughout the life of a loan or investment, a variable interest rate can fluctuate based on various factors. There are … …
Benefits of Unsecured Loans 1. No Collateral Required Unlike secured loans, unsecured loans do not require collateral. This means you don’t have to put any of your assets, such as your home or car, at risk. This can provide peace of mind and flexibility, especially if you don’t have valuable … …
What is Unearned Interest? Unearned interest refers to the interest that is accrued on a loan but has not yet been earned by the lender. It is the portion of the interest that is charged to the borrower but has not yet been paid or earned by the lender. When … …
What is WAC? WAC stands for With Approved Credit. It is a term commonly used in the financial industry, particularly in the context of loans and credit applications. WAC refers to the condition that a borrower must meet in order to qualify for a loan or credit, indicating that their … …
Definition of Whole Loan A whole loan is a type of loan that is originated and held by a single lender or investor, as opposed to being securitized and sold off to multiple investors. It is a complete loan package, consisting of the full principal amount, interest rate, and repayment … …
What is Weighted Average Life (WAL)? Weighted Average Life (WAL) is a financial term used to measure the average time it takes for the principal amount of a loan or investment to be repaid or recovered. It is a calculation that takes into account the timing and amount of cash … …
What are Usury Rates? Usury rates refer to the maximum interest rates that can be charged on loans. These rates are set by regulatory authorities to protect borrowers from excessive interest charges and to ensure fair lending practices. Usury rates vary from country to country and are often influenced by … …
What are Unsecured Loans? Unsecured loans are a type of loan that does not require collateral. Unlike secured loans, which are backed by assets such as a house or a car, unsecured loans are granted based on the borrower’s creditworthiness and ability to repay the loan. These loans are typically … …
What is Unsecured Debt? Unsecured debt refers to any type of debt that is not backed by collateral. This means that if you default on the loan, the lender cannot seize any specific asset as repayment. Instead, the lender may take legal action to collect the debt, but they cannot … …
What is Total Debt Service (TDS) Ratio? The Total Debt Service (TDS) Ratio is a financial metric used by lenders to assess a borrower’s ability to manage their debt obligations. It measures the proportion of a borrower’s income that goes towards servicing their total debt, including mortgage payments, credit card … …
What is an Interest Rate Floor? An interest rate floor is a provision in a loan agreement that sets a minimum interest rate that the borrower must pay on the loan. It acts as a protection for the lender, ensuring that they will receive a minimum level of interest income, … …
Financial Impact of Being Past Due on a Loan When you fall behind on loan payments and become past due, it can have significant financial consequences. These consequences can affect your credit score, your ability to borrow in the future, and even your legal standing. It is important to understand … …
What are Qualifying Ratios? Qualifying ratios are financial calculations that lenders use to assess a borrower’s ability to repay a loan. These ratios compare a borrower’s income and debt obligations to determine if they meet the lender’s criteria for loan approval. Qualifying ratios are expressed as percentages. Lenders typically have … …
What are Non-Purpose Loans? A non-purpose loan is a type of loan that is not specifically designated for a particular purpose. Unlike traditional loans, which are typically used for specific purposes such as buying a house or a car, non-purpose loans can be used for any purpose the borrower chooses. … …
How Margin Loans Work A margin loan is a type of loan that allows investors to borrow money to purchase securities such as stocks, bonds, or mutual funds. It is a form of leverage that can potentially increase an investor’s buying power and potential returns. 1. Initial Margin Requirement When … …
Exploring the Mechanics of Loans Loan Terms Interest is another crucial aspect of loans. It is the cost of borrowing money and is typically expressed as a percentage of the principal. The interest rate can be fixed, meaning it remains the same throughout the loan term, or variable, meaning it … …
Mechanisms of Loan Grading Loan grading is a crucial process that involves assessing the creditworthiness and risk associated with a loan. It helps lenders and investors make informed decisions by categorizing loans into different grades based on their level of risk. There are several mechanisms involved in the loan grading … …
What is a Loan Commitment? A loan commitment is a formal agreement between a lender and a borrower that outlines the terms and conditions of a loan. It is a promise from the lender to provide a specific amount of money to the borrower, subject to certain conditions being met. … …
What is Joint Credit? Joint credit is a type of credit that is extended to two or more individuals who are equally responsible for repaying the debt. It is commonly used by couples, family members, or business partners who want to share the responsibility of borrowing money. With joint credit, … …
Types of In-House Financing In-house financing refers to a financing option that is provided directly by the seller or service provider, rather than through a traditional lender such as a bank or credit union. This type of financing can be beneficial for individuals or businesses who may not qualify for … …
Definition of High Ratio Loans A high ratio loan refers to a type of loan where the borrower provides a smaller down payment, typically less than 20% of the total purchase price of the property. In other words, it is a loan that has a high loan-to-value ratio (LTV). Why … …
What is a Guarantor? A guarantor is a person or entity who agrees to take on the financial responsibility for another individual’s debt or obligation if that individual fails to fulfill their financial obligations. This means that if the borrower is unable to make the required payments, the guarantor is … …
Definition of Fixed-Rate Payment A fixed-rate payment is a type of payment that remains constant for the duration of a loan or financing agreement. It is a predetermined amount that the borrower is required to pay on a regular basis, typically monthly, to the lender or financial institution. This type … …
The Role of Financing in Achieving Financial Goals Financing plays a crucial role in achieving financial goals. Whether it’s starting a business, buying a home, or pursuing higher education, most of us rely on some form of financing to make our dreams a reality. One of the main reasons financing … …
What are Finance Charges? Finance charges refer to the fees or interest that borrowers pay to lenders for the use of borrowed money. These charges are typically added to the principal amount of a loan or credit card balance and can significantly increase the overall cost of borrowing. Finance charges … …
What are Delayed Draw Term Loans? Delayed draw term loans are a type of loan that allows borrowers to access funds in multiple tranches or disbursements over a specified period of time. Unlike traditional term loans, where the entire loan amount is disbursed upfront, delayed draw term loans provide flexibility … …
What is Collateral? Collateral provides a level of security to the lender, as it reduces the risk of default. It gives the lender a tangible asset that can be used to recoup their losses in case the borrower is unable to repay the loan. This is especially important for loans … …
What Are Bridge Loans? A bridge loan is a short-term loan that is used to bridge the gap between the purchase of a new property and the sale of an existing property. It is a temporary financing option that helps borrowers secure the funds they need to complete a real … …