Loan Terminology

Amortization

Over a specified period of time, this is the gradual elimination of a debt achieved through regular payments (sufficient enough to cover both the principal and the interest).

Balloon Loan

A type of loan that does not fully amortize its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan.

Borrowing Power

The amount an individual or organization can borrow. This is calculated using income/revenue, expenses and other debt obligations.

Capital Expenditures

Money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.

Line of Credit

A loan that allows the borrower to withdraw money from an account up to a specified limit.

Principal

The amount of money that the loan applicant requests to borrow.