An advance refers to a payment on account or a loan. It is particularly relevant in a partnership context, referring to amounts paid into the partnership that exceed agreed capital contributions. Under the Partnership Act 1890, such advances collect interest unless otherwise agreed by the partners. On dissolution, advances are repaid after external creditors but before the distribution of remaining capital to the partners.
The annual percentage rate (APR) represents the annualized cost of borrowing or the annual rate of return on an investment, incorporating interest rate and all associated fees.
Bank interest refers to the cost incurred by a borrower for the privilege of using funds from a financial institution. This charge is calculated based on the daily cleared overdraft balance or a committed loan, with the interest rate typically consisting of the base rate plus an additional percentage ranging from 1% to 5%.
Collateral refers to a valuable asset that a borrower offers to a lender as a way to secure a loan. This asset provides security to the lender in the event the borrower defaults on the loan.
A credit line, also known as a line of credit, refers to a pre-approved loan amount that a borrower can draw upon as needed and repay either immediately or over time. It is commonly used for short-term borrowing needs.
An Equipment Trust Certificate (ETC) is a financial instrument used in the USA to document loans intended for the purchase of major equipment. The certificate holder has a secured interest in the asset, akin to a mortgage, commonly seen in industries like airlines and shipping.
The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal. It also refers to the earning rate for deposits held in a financial institution.
A loan is a financial transaction where a lender provides property, typically money, to a borrower, who promises to return the property with interest after a specified period.
A mortgage is a legal agreement by which a sum of money is lent to a borrower for purchasing property, with the property serving as collateral. The borrower is the mortgagor, and the lender is the mortgagee.
A mortgagor is an individual or entity that borrows money through a mortgage by pledging property as security for the loan.
An overdraft is a loan provided by a bank or building society for a customer with a cheque account, allowing the account to go into debit, up to a specified limit known as the overdraft limit.
A policy loan is a loan issued by an insurance company that is secured by the cash surrender value of a life insurance policy. The amount available for such a loan is contingent upon various factors.
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.
A power of attorney form used to transfer ownership of a registered security from the owner to another party. This document is essential in executing the transfer of securities efficiently and legally.
A multifaceted concept in finance and legal agreements, referring to either the period during which conditions of a contract will be carried out or the specific provisions within an agreement.
An unearned discount is an account on the books of a lending institution that recognizes interest deducted in advance from a loan. This interest will be taken into income as earned over the life of the loan.
