- Mathematical formula for calculating a borrower's monthly payments, based on the amount borrowed, the interest rate and the term of the loan.
balance, payment cycle, principal, interest
Related Terms and Acronyms
- Amortization — Definition,
- Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
- Amortization Period — Definition,
- The amount of time it will take to pay off a mortgage by making routine payments.
- Interest (int, IN) — Acronym & Abbreviation,
➥ Bank account transaction code.
- Money paid for the use of borrowed funds, usually expressed as an annual percentage.
- Negative Amortization — Definition,
- A gradual increase in loan debt that occurs when the monthly payment does not cover the entire principal and interest due. The shortfall is added to the remaining balance which creates "negative" amortization.
- Pre-computed Loan — Definition,
- With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. After signing for this type of vehicle loan, the borrower is obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan.
- Principal — Definition,
- The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
- Rate — Definition,
- Percentage a borrower pays for the use of money, usually expressed as an annual percentage.
- Remaining Balance — Definition,
- Unpaid principal on a loan.
- Term — Definition,
- The length of time you commit to repay a lender or bank at an agreed upon interest rate and payment schedule. The interest rate usually remains constant during this term unless the commitment states otherwise. For example, a five year fixed rate mortgage has a term of five years.