Moratorium Period
What is a Moratorium Period? A moratorium period is a period during which the borrower is not obligated to make payments. In other words, during a moratorium period, the borrower is permitted to halt their payments. It is commonly incorporated in home loans – called an equated monthly installments holiday – and educational loans. Understanding...
Subprime Loan
What is a Subprime Loan? A subprime loan is a loan offered to individuals at an interest rate above prime, who do not qualify for conventional loans. Such individuals have low income, limited credit history, poor quality collateral, or poor credit. The subprime option is common in many different types of loans, including auto loans...
Subordination Agreement
What is a Subordination Agreement? A Subordination Agreement is a narrow form of Intercreditor Agreement that focuses on the priority of two or more creditors’ debts and claims concerning a borrower with multiple loans and common security interest. It is also known as a Priority Agreement. The contract governs the lien position among creditors with...
Overcollateralization
What is Overcollateralization? Overcollateralization is used to define the situation where an asset (or assets) value used as collateral on a loan exceeds the loan value. It is commonly used by borrowers to reduce credit risk for the creditor and enhance the loan’s credit rating. The Collateralization Ratio The collateralization ratio is outlined below: A...
Standby Letter of Credit (SBLC)
What is a Standby Letter of Credit (SBLC)? A standby letter of credit, abbreviated as SBLC, refers to a legal document where a bank guarantees the payment of a specific amount of money to a seller if the buyer defaults on the agreement. An SBLC acts as a safety net for the payment of a...
