Borrowing

What is a loan?

In a loan, a certain quantity of money is given to another person in exchange for the value or main amount being repaid at a later date. In many circumstances, the lender increases the principal value by adding interest or finance charges, which the borrower must pay in addition to the principal sum. A loan can be returned in one of three ways: (1) through a one-time loan payment, (2) through a number of recurring payments, or (3) by incurring several debts and/or payments.

• One-Time Loan Payments - Applies simple and compound interest.

• Several Regular Payments - This scenario involves an annuity, which is a series of equal payments received on a regular or periodic basis.

Amortization vs. Annuity:

A succession of equal cash inflows over time is referred to as an annuity. A cost that exceeds a given threshold is allocated over time (a cash outflow) through amortization.

Additional Information:

Credit Cards - 

Heavily related to the concept of Borrowing, a credit card is a plastic card with information on it that allows the owner of the name on the card to charge goods or services to their account and be billed later.

Parts of a Credit Card Bill: 

• Customer number 

• Statement date 

• Payment due date 

• Credit limit 

• Total amount due 

• Minimum amount 

• Cash advance