Variable Rate Loans
What are Variable Rate Loans? A variable rate loan is a type of loan where the interest changes according to changes in market interest rates. Unlike a fixed-rate loan, where borrowers pay a constant interest rate, a variable rate loan comprises varying monthly or quarterly payments that change according to market interest rate changes. Lenders...
Secured vs Unsecured Loans
What are Secured vs Unsecured Loans? When planning to take out a personal loan, a borrower can choose between secured vs unsecured loans. When borrowing money from a bank, credit union, or other financial institution, an individual is essentially taking a loan. The bank has the discretion to decide whether to require the borrower to...
Amortizing Loan
What is an Amortizing Loan? An amortizing loan is a type of credit that is repaid via periodic installment payments over the lifetime of a loan. Installments are typically monthly payments, but not always. Each periodic payment includes both a principal portion and an interest portion. Amortization refers to the reduction in loan principal outstanding....
Restrictive Covenants
What are Restrictive Covenants? Restrictive or negative covenants are a type of non-financial covenants that limit the borrower from engaging in a certain activity or keep it from exceeding a predetermined limit. They are called “negative” debt covenants because they impose restrictions or create certain boundaries for the borrower that it is not supposed to...
Standby Fee
What is a Standby Fee? Standby fee is a term used in the banking industry to refer to the amount that a borrower pays to a lender to compensate for the lender’s commitment to lend funds. The borrower compensates the lender for guaranteeing a loan at a specific date in the future. In exchange, the...
