An amortization schedule is a detailed table laying out the periodic payments on a loan, breaking them down into interest and principal components, as well as showing the remaining balance after each payment. It is vital for understanding how a loan is paid off and the interest incurred over time.
A closed-end mortgage is a type of mortgage loan whose principal amount cannot be increased during the payout period. This contrasts with an open-end mortgage, where the loan amount can be revised or increased.
A consolidation loan is a new loan that pays off more than one existing loan, generally providing easier repayment terms. It is often used to simplify multiple debts into a single monthly payment with a potentially lower interest rate.
A credit limit represents the maximum amount a financial institution extends as a loan or line of credit to an individual or business based on their creditworthiness and financial background.
A finance charge is an interest or a certain other fees charged to a credit customer. It is a cost imposed for borrowing or the service of advancing credit.
Outstanding balance is the amount currently owed on a debt after accounting for payments already made toward the principal and interest. It is a key figure in managing financing and understanding one’s debt obligations.
Refinancing refers to the process of replacing an existing mortgage with a new one, typically to secure better loan terms such as a lower interest rate or a different type of loan structure. Often abbreviated as 'refi,' this process involves paying off an old loan with a new loan, typically to take advantage of lower interest rates, different loan terms, or to switch from a variable-rate mortgage to a fixed-rate mortgage.
To retire a debt means to pay off the principal on a loan, thereby fulfilling the obligation under the loan contract, which can be done through regular payments or a lump sum. It is a significant financial milestone indicating that the borrower has met the terms laid out by the lender.
Strategic default is the intentional cessation of payments on a debt despite having the financial means to fulfill the obligation, typically done for perceived financial benefits.
