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Financial Terms Related to Loan

Financial Terms Related to Loan

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Loan Loan Document Transcript

  • Financial Terms related to Loan This document is part of the valuable contents available at www.ftpall.com, a free onlineglossary with more than five thousand financial and business terms. This document can be copied and distributed freely Find thousands of financial terms at www.ftpall.com respecting its original format. It is forbidden its transcription, translation or change on its format without authorization of its author or editor.LOANBack end loan fund • A mutual fund that charges investors a fee to sell (redeem) shares often is ranging from 4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a designated time, such as one year. The commission decreases the longer the investor holds the shares. The formal name for the back- end load is the contingent deferred sales charge, or CDSC.Back to back loan • An example of a back-to-back loan would be IBM agreeing to lend dollars to British Petroleum in exchange for the latter lending pounds to IBM. Such agreements are struck only when exchange controls in one or more countries prevent normal capital flows. • A loan in which two companies in separate countries borrow each others currency for a specific time period and repay the others currency at an agreed upon maturity.
  • www.ftpall.com 2|PageBridge loan • Is a type of temporary financing which is extended until permanent financing is secured. At that time, funds from the new permanent financing are used to pay off the bridge loan. Sometimes, investment banks have arranged, if not granted, bridge loans in order to participate in a syndicate mandated to raise long-term or permanent financing.Broker loan rate • Related: Call money rate. Find thousands of financial terms at www.ftpall.comBuilder buy down loan • A mortgage loan on newly developed property that the builder subsidizes during the early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the prevailing market loan rate for some period of time. The typical buy down is 3% of the interest-rate amount for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buy down).Bullet loan • A bank term loan that calls for no amortization. • A bank term loan that calls for no amortization. The term is commonly used in the Euromarket.Bullet loan or security • All principal is due at maturity.Collateralized loan obligation • Is similar in structure to the Collateralized Mortgage Obligation. See Collateralized Mortgage Obligation for analogous terms.Commercial and industrial loans c&i loans • Loans made to mining, manufacturing, trade, transport, construction, and service
  • www.ftpall.com 3|Page firms. These can be secured and unsecured, spot loan or a loan commitment, revolving or take-it-or-leave it type of loan.Day loans • Loans made by chartered banks to investment dealers who are major holders of treasury bills.Dealer loan • Overnight, collateralized loan made to a dealer financing his position by borrowing Find thousands of financial terms at www.ftpall.com from a money market bank. • Overnight, collateralized loan made to a dealer financing his position by borrowing from a money market bank.Discount loans • Loans on which interest is paid in advance by being deducted from the amount borrowed.Discount window loans • These are the loans Federal Reserve makes to the banks. The interest cost is below the Fed funds rate. Maybe used during temporary liquidity crunches as emergency borrowing. Fed may clamp down on excessive usage. Arbitraging the fed funds rate can potentially cost the bank its charter.Equivalent loan • Given the after-tax stream associated with a lease, the maximum amount of conventional debt that the same period-by-period after-tax debt service stream is capable of supporting.Eurocurrency loan market • A large number of international banks that make long-term, floating rate, hard- currency (typically U.S. dollar-denominated) loans in the form of lines of credit to
  • www.ftpall.com 4|Page international corporate and government borrowers.Federal home loan banks • The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis- -vis member commercial banks. • Abbreviated FHLB. Government sponsored wholesale banks (currently 12 regional banks) that lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The Find thousands of financial terms at www.ftpall.com mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. • The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks plays a role analogous to that played by the Federal Reserve Banks vis-a-vis member commercial banks.Federal home loan mortgage corporation • Is one of the three Government Sponsored Agencies, issues mortgage pass- throughs and provides guarantee against defaults.Fixed rate loan • A loan with a rate of interest that is determined at a set increment above the prime rate at which it remains fixed until maturity. • A loan on which the rate paid by the borrower is fixed for the life of the loan. • A loan on which the rate paid by the borrower is fixed for the life of the loan.Floating rate loan • A loan with a rate of interest initially set at a state premium above the prime rate and allowed to float, or vary, as the prime rate varies until maturity.Intercompany loan
  • www.ftpall.com 5|Page • Loan made by one unit of a corporation to another unit of the same corporation.Inventory loan • A secured short-term loan to purchase inventory. The three basic forms are a blanket inventory lien, a trust receipt, and field warehousing financing.Jumbo loan • Jumbo Loans are loans in excess of $240,00. • Loans of $1 billion or more. Or, loans that exceed the statutory size limit eligible for Find thousands of financial terms at www.ftpall.com purchase or securitization by the federal agencies.Loan amortization • The determination of the equal annual loan payments necessary to provide a lender with a specified interest return and to repay the loan principal over a specified period.Loan amortization schedule • A schedule of equal payments to repay a loan. It shows the allocation of each loan payment to interest and principal. • The schedule for repaying the interest and principal on a loan.Loan commitments • Loan commitments involve a promise by the bank to provide a loan at some (usually fixed) interest rate during a stated time period (say 1 year). The customer has the option of taking down a loan in the future at the agreed upon rate if he so chooses.Loan syndication • Group of banks sharing a loan. See: syndicate.Loan value
  • www.ftpall.com 6|Page • The amount a policy holder may borrow against a whole life insurance policy at the interest rate specified in the policy.Multicurrency loans • Give the borrower the possibility of drawing a loan in different currencies.Multifamily loans • Loans usually represented by conventional mortgages on multi-family rental apartments. Find thousands of financial terms at www.ftpall.comParallel loan • A process whereby two companies in different countries borrow each others currency for a specific period of time, and repay the others currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back- to-back loans. • An example of a parallel loan would be IBM agreeing to lend dollars to a sub of British Petroleum in exchange for the latter lending pounds to an IBM British sub. Such agreements are struck only when exchange controls in one or more countries prevent normal capital flows.Project loan certificate • Abbreviated PLC. A primary program of Ginnie Mae for securitizing FHA-insured and co-insured multifamily, hospital, and nursing home loans.Project loan securities • Securities backed by a variety of FHA-insured loan types -primarily multi-family apartment buildings, hospitals, and nursing homes.Project loans • Usually FHA-insured and HUD-guaranteed mortgages on multiple-family housing complexes, nursing homes, hospitals, and other development types.
  • www.ftpall.com 7|PageRevolving loans • These refer to a type of loan where the maximum amount is initially specified. The borrower can at any time borrow and repay any amounts as long as they stay below the maximum amount of the revolver credit. Credit cards are an example of revolver loans.Savings and loan association • Federal- or state-chartered institution that accepts savings deposits and invests the bulk of the funds thus received in mortgages. Find thousands of financial terms at www.ftpall.com • National- or state-chartered institution that accepts savings deposits and invests the bulk of the funds thus received in mortgages.Secured loan • A loan that has specific assets pledged as collateral. • These are the loans which require that certain assets must be pledged as security. In case of default, the lender will receive these assets. Once pledged, the same assets cannot be pledged to someone else. Most bank loans require that accounts receivables and inventory be pledged as security.Self liquidating loan • Loan to finance current assets, The sale of the current assets provides the cash to repay the loan.Short term self liquidating loan • An unsecured short-term loan in which the use to which the borrowed money is put provides the mechanism through which the loan is repaid.Term loan • Loan extended by a bank for more than the normal 90day period. A term loan might run five years or more.
  • www.ftpall.com 8|Page • A bank loan, typically with a floating interest rate, for a specified amount that matures in between one and ten years and requires a specified repayment schedule.Term loan agreement • A formal contract, ranging from a few to a few hundred pages, specifying the conditions under which a financial institution has made a long-term loan.Term long term loan • A loan made by a financial institution to a business and having an initial maturity of Find thousands of financial terms at www.ftpall.com more than one year.Transaction loan • A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving credit agreements involve loans that can be used for various purposes.Trust receipt inventory loan • A secured short-term loan against inventory under which the lender advances 80 to 100 percent of the cost of the borrowers relatively expensive inventory items in exchange for the borrowers promise to repay the lender, with accrued interest, immediately after the sale of each item of collateral.Unsecured loan • A loan that has no assets pledged as collateral.Variable rate loan • Loan made at an interest rate that fluctuates with the prime. • Loan made at an interest rate that fluctuates based on a base interest rate such as the Prime Rate or LIBOR.Warehouse receipt loan • A secured short-term loan against inventory under which the lender receives control of the pledged inventory collateral, which is stored by a designated
  • www.ftpall.com 9|Page warehousing company on the lender behalf.Whole loan • Is a mortgage, either commercial or residential, that has not been securitized. Find thousands of financial terms at www.ftpall.com