Cedar Valley Realtor

Interest and partial capital

In the U.S. a partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding capital balance is due at some point short of that term. In the UK, a partial repayment mortgage is quite common, especially where the original mortgage was investment-backed and on moving house further borrowing is arranged on a capital and interest (repayment) basis. In banking and finance, a bullet loan is a loan where a payment of the entire principal of the loan,[1] and sometimes the principal and interest,[2] is due at the end of the loan term. Likewise for bullet bond. A bullet loan can be a mortgage, bond, note or any other type of credit. The payment that is due at the end of the loan is referred to as the bullet payment or balloon payment. Bullet loans are common, and usually referred to by other names; bullet loan is a generic and unofficial term. Many types of publicly traded bonds and notes constitute bullet loans: the face value of the bond is payable at bond maturity, and only interest payments are due during the interim periods. Short-term bonds or notes which pay no interest are also a form of bullet loan. Bullet loans should be contrasted with amortizing loans, where the amount of principal is paid down over the life of the loan. There is no requirement that a loan be a bullet loan or an amortizing loan; combinations of all sorts exist. For example, a loan may have a grace period during which no principal is paid; partial amortization during the remainder of the loan; and a bullet payment at the end of the loan that is some percentage of the original principal. In China, certain types of bullet loans have been prohibited by the China Banking Regulatory Commission due to concerns regarding Chinese banks' risk management capabilities.[3] This extends only to lending to retail, commercial, and go

ernment clients, while not including the issuance of bonds or notes. Credit (from Latin credo transl. "I believe" ) is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment.[1] Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower. Credit does not necessarily require money. The credit concept can be applied in barter economies as well, based on the direct exchange of goods and services (Ingham 2004 p. 12-19). However, in modern societies credit is usually denominated by a unit of account. Unlike money, credit itself cannot act as a unit of account. Movements of financial capital are normally dependent on either credit or equity transfers. Credit is in turn dependent on the reputation or creditworthiness of the entity which takes responsibility for the funds. Credit is also traded in financial markets. The purest form is the credit default swap market, which is essentially a traded market in credit insurance. A credit default swap represents the price at which two parties exchange this risk Ц the protection "seller" takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis point is 1/100 of a percent) of the notional amount to be referenced, while the protection "buyer" pays this premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the par amount (that is, is made whole).