Notes

📚 Search if you must

Top categories:

academic

notes

Belt

Deposit Note Issue

Accrued Interest: Interest that has been earned on a deposit or loan but has not yet been paid to the depositor or lender. This interest accumulates over time and is typically paid out at regular intervals, such as monthly or annually.
Adjustable-Rate Mortgages (ARMS): A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. The initial interest rate is usually lower than that of a fixed-rate mortgage, but it can change periodically based on changes in a corresponding financial index.
Adverse Action: Any action taken by a lender that negatively affects a borrower’s credit terms. This can include denying a credit application, increasing interest rates, or reducing credit limits. Under the Equal Credit Opportunity Act, lenders must provide a notice explaining the reasons for the adverse action.
Agent: An individual or entity authorized to act on behalf of another person or organization in financial transactions. Agents can perform various tasks, such as managing investments, executing trades, or handling administrative duties.
Amortization: The process of gradually paying off a debt over time through regular payments of principal and interest. Amortization schedules outline the specific amounts of each payment that go toward reducing the principal balance and covering interest expenses.
Annual Percentage Rate (APR): The annual cost of borrowing expressed as a percentage. APR includes not only the interest rate but also any fees or other costs associated with the loan, providing a more comprehensive measure of the true cost of borrowing.
Assignment: The transfer of rights or interests in a financial asset from one party to another. For example, a lender may assign a mortgage to another financial institution, transferring the right to receive payments from the borrower.
Bank Note: A type of negotiable instrument issued by a bank, payable to the bearer on demand. Bank notes are commonly used as a form of currency and represent the bank’s promise to pay the specified amount to the holder.
Basis Point: A unit of measurement used in finance to describe changes in interest rates or other financial percentages. One basis point is equal to 0.01%, so a change of 100 basis points is equivalent to a 1% change.
Break Fees: Penalty charges imposed by a lender when a borrower repays a loan before the end of the agreed term. Break fees compensate the lender for the loss of interest income that would have been earned if the loan had remained in place for the full term.
Bridging Finance: Short-term financing used to bridge the gap between the purchase of a new asset and the sale of an existing asset. Bridging finance is often used in real estate transactions to provide temporary funding until the sale of a property is completed.
Business Day: Any day on which banks are open for business and able to process transactions. Business days typically exclude weekends and public holidays.
Capital Adequacy Ratio: A measure of a bank’s financial strength, expressed as the ratio of its capital to its risk-weighted assets. This ratio helps ensure that banks have enough capital to absorb potential losses and continue operating during periods of financial stress.
Capped Loan: A loan with an interest rate that cannot exceed a specified maximum level for a certain period. Unlike fixed-rate loans, the interest rate on a capped loan can decrease if market rates fall, but it will not rise above the cap.
Charge: A legal right or interest that a lender has in a borrower’s property, used as security for a debt. If the borrower defaults on the loan, the lender can enforce the charge to recover the outstanding amount.
Cleared Funds: Money that has been deposited into an account and is available for withdrawal. Cleared funds have been processed by the bank and are no longer subject to holds or delays.
Clicks and Mortar: A business model that combines online and offline operations. For example, a retailer may have both a physical store and an e-commerce website, allowing customers to shop in person or online.
Collateral Security: Additional security provided by a borrower to support a loan. Collateral can include assets such as real estate, vehicles, or investments, which the lender can seize if the borrower defaults on the loan.
Combination Loan: A loan that combines multiple types of financing into a single package. For example, a combination loan may include both a fixed-rate and an adjustable-rate component, providing the borrower with the benefits of both loan types.
Compliance Certificate: A document provided by a borrower to a lender, certifying that the borrower has met all the terms and conditions of the loan agreement. Compliance certificates are typically required at regular intervals, such as quarterly or annually.
Core Banking System: The central software platform used by a bank to manage its day-to-day operations, including account management, transaction processing, and customer service. Core banking systems are critical to the efficient functioning of a bank.
Day 1 and Day 2 Processing: Terms used to describe the stages of processing financial transactions. Day 1 processing involves the initial capture and validation of transaction data, while Day 2 processing includes the settlement and reconciliation of transactions.
Debt to Equity Ratio: A financial ratio that compares a company’s total debt to its shareholders’ equity. This ratio provides insight into the company’s financial leverage and its ability to meet its debt obligations.
Default: The failure to fulfill the terms of a loan agreement, such as missing a payment or violating a covenant. Default can result in penalties, increased interest rates, or legal action by the lender.
Deposit Note: A type of promissory note issued by a bank, promising to pay the bearer a specified sum of money on demand or at a future date. Deposit notes are often used as a form of short-term financing.
Discount Rate: The interest rate charged by a central bank on loans to commercial banks. The discount rate influences the cost of borrowing and the overall level of interest rates in the economy.
Due Diligence: The process of thoroughly investigating and evaluating a business or individual before entering into a financial transaction. Due diligence helps identify potential risks and ensure that all relevant information is considered.
Equity: The value of an owner’s interest in an asset, calculated by subtracting liabilities from the asset’s total value. Equity represents the owner’s residual claim on the asset after all debts have been paid.
Fixed-Rate Loan: A loan with an interest rate that remains constant throughout the term of the loan. Fixed-rate loans provide borrowers with predictable monthly payments and protection against interest rate fluctuations.
Floating-Rate Loan: A loan with an interest rate that can change over time, based on market conditions. Floating-rate loans are often tied to a benchmark interest rate, such as the prime rate or LIBOR.
Foreclosure: The legal process by which a lender takes possession of a property used as collateral for a loan, due to the borrower’s failure to make payments. Foreclosure allows the lender to sell the property to recover the outstanding loan balance.
Guarantor: A person or entity that agrees to be responsible for the debt or obligation of another. If the borrower defaults on the loan, the guarantor is legally obligated to repay the debt.
Interest Rate: The percentage of a loan amount charged by a lender to a borrower for the use of assets. Interest rates can be fixed or variable and are influenced by factors such as inflation, economic conditions, and central bank policies.
Investment Grade: A rating that indicates a bond or other debt security is of high quality and low risk. Investment-grade securities are considered safe investments and are typically issued by financially stable companies or governments.
Leverage: The use of borrowed funds to increase the potential return on investment. Leverage can amplify both gains and losses, making it a powerful but risky financial strategy.
Lien: A legal right or interest that a lender has in the borrower’s property, used as security for a debt. A lien allows the lender to take possession of the property if the borrower defaults on the loan.
Liquidity: The ability of an asset to be quickly converted into cash without significant loss of value. High liquidity is important for meeting short-term financial obligations and managing cash flow.
Loan-to-Value Ratio (LTV): A financial ratio that compares the amount of a loan to the value of the asset being purchased. LTV is used by lenders to assess the risk of a loan, with higher LTV ratios indicating greater risk.
Maturity Date: The date on which the principal amount of a loan, bond, or other financial instrument becomes due and is to be paid in full. The maturity date marks the end of the loan term and the final payment.
Mortgage: A loan used to purchase real estate, where the property itself serves as collateral. Mortgages typically have long terms, such as 15 or 30 years, and can have fixed or variable interest rates.
Non-Performing Loan (NPL): A loan in which the borrower is in default and has not made any scheduled payments of principal or interest for a specified period. NPLs are considered high-risk and can negatively impact a bank’s financial health.
Overdraft: A facility that allows an account holder to withdraw more money than is available in their account, up to an agreed limit. Overdrafts provide short-term liquidity but often come with high interest rates and fees.
Principal: The original sum of money borrowed in a loan, or the amount still owed on a loan, excluding interest. The principal is the base amount on which interest is calculated.
Promissory Note: A written promise to pay a specified amount of money at a future date or on demand. Promissory notes are legally binding and can be used as a form of short-term financing.
Refinancing: The process of replacing an existing loan with a new loan, typically with better terms such as a lower interest rate or longer repayment period. Refinancing can help borrowers reduce their monthly payments or pay off their debt faster.
Repayment Schedule: A plan that outlines the amount and timing of payments to be made on a loan. Repayment schedules help borrowers manage their finances and ensure that they make timely payments.
Reserve Requirement: The minimum amount of reserves that a bank must hold against its deposit liabilities, as mandated by the central bank. Reserve requirements help ensure that banks have enough liquidity to meet customer withdrawals and other obligations.
Secured Loan: A loan that is backed by collateral, reducing the risk for the lender. If the borrower defaults on the loan, the lender can seize the collateral to recover the outstanding amount.
Securitization: The process of pooling various types of debt, such as mortgages or credit card receivables, and selling them as bonds to investors. Securitization helps lenders raise capital and spread risk.
Subprime Loan: A loan offered to borrowers with poor credit histories, typically with higher interest rates to compensate for the increased risk. Subprime loans can help borrowers access credit but may also carry higher default rates.
Term Loan: A loan that is repaid in regular payments over a set period of time. Term loans are often used for large purchases, such as equipment or real estate, and can have fixed or variable interest rates.
Underwriting: The process by which a lender evaluates the risk of lending money to a borrower and determines the terms of the loan. Underwriting involves assessing the borrower’s creditworthiness, income, and other factors.
Unsecured Loan: A loan that is not backed by collateral, relying solely on the borrower’s creditworthiness. Unsecured loans typically have higher interest rates than secured loans due to the increased risk for the lender.
Variable Interest Rate: An interest rate that can change over time, based on market conditions. Variable interest rates are often tied to a benchmark rate, such as the prime rate or LIBOR, and can fluctuate with changes in the economy.
Yield: The income return on an investment, typically expressed as an annual percentage rate. Yield can include interest payments, dividends, and capital gains.
Zero-Coupon Bond: A bond that does not pay periodic interest, but is sold at a discount to its face value and pays the full face value at maturity. Zero-coupon bonds provide a lump-sum payment at maturity and are often used for long-term investments.
Credit Risk: The risk of loss due to a borrower’s failure to make payments on a loan. Credit risk is a key consideration for lenders and can impact the terms and interest rates of a loan.
Debt Instrument: A financial instrument that represents a loan made by an investor to a borrower. Debt instruments can include bonds, notes, and other forms of debt securities.
Financial Intermediary: An institution that facilitates the channeling of funds between lenders and borrowers. Financial intermediaries include banks, credit unions, and other financial institutions.
Interest Coverage Ratio: A measure of a company’s ability to meet its interest payments, calculated by dividing earnings before interest and taxes (EBIT) by interest expenses. A higher ratio indicates better financial health and a lower risk of default.
Loan Covenant: A condition or requirement included in a loan agreement, which the borrower must comply with. Loan covenants can include financial ratios, reporting requirements, and other terms designed to protect the lender.
Monetary Policy: The actions taken by a central bank to control the money supply and interest rates in an economy. Monetary policy can influence inflation, employment, and economic growth.
Net Interest Margin (NIM): A measure of the difference between the interest income generated by banks and the amount of interest paid out to their lenders. NIM is an indicator of a bank’s profitability and efficiency.
Non-Banking Financial Company (NBFC): A financial institution that provides banking services without meeting the legal definition of a bank. NBFCs can offer loans, investments, and other financial products but may be subject to different regulations than traditional banks.
Provision for Loan Losses: An expense set aside as an allowance for bad loans or non-performing loans. Provisions help banks manage credit risk and ensure they have sufficient reserves to cover potential losses.
Risk-Weighted Assets (RWA): A bank’s assets weighted according to their risk, used to determine the capital requirement. Higher-risk assets require more capital to protect against potential losses.
Stress Test: An analysis conducted to determine the ability of a financial institution to withstand adverse economic conditions. Stress tests help identify vulnerabilities and ensure that banks have sufficient capital to absorb potential losses.
Tier 1 Capital: The core capital of a bank, consisting of common equity and disclosed reserves. Tier 1 capital is the primary measure of a bank’s financial strength and ability to absorb losses.
Tier 2 Capital: Supplementary capital of a bank, including subordinated debt and hybrid instruments. Tier 2 capital provides additional protection against losses but is considered less secure than Tier 1 capital.
Treasury Bills (T-Bills): Short-term debt securities issued by the government, with maturities of one year or less. T-Bills are considered low-risk investments and are often used by investors to manage short-term liquidity.
Wholesale Banking: Banking services provided to large institutions, corporations, and government agencies. Wholesale banking includes services such as lending, treasury management, and investment banking.
Write-Off: The process of removing a bad debt or non-performing loan from a bank’s balance sheet. Write-offs help banks manage their financial statements and reflect the true value of their assets.
Yield Curve: A graph that shows the relationship between interest rates and the maturity of debt securities. The yield curve can provide insights into market expectations for interest rates and economic growth.
Z-Score: A statistical measure used to assess the credit risk of a company, based on its financial ratios. The Z-Score helps predict the likelihood of bankruptcy and is used by lenders and investors to evaluate creditworthiness.
Zero-Balance Account (ZBA): A bank account that maintains a balance of zero by automatically transferring funds from a master account to cover transactions. ZBAs are used by businesses to manage cash flow and minimize idle balances.

Discount Note

Accrued Interest: Interest that has accumulated on a discount note but has not yet been paid out.

Amortization: The process of gradually paying off a debt over time through regular payments.
Arbitrage: The simultaneous purchase and sale of an asset to profit from a difference in the price.
Asset-Backed Security (ABS): A financial security backed by a pool of assets such as loans, leases, or receivables.
Banker’s Acceptance: A short-term debt instrument issued by a company that is guaranteed by a commercial bank.
Basis Point: One hundredth of a percentage point (0.01%).
Bid-Ask Spread: The difference between the highest price a buyer is willing to pay for an asset and the lowest price a seller is willing to accept.
Bond: A fixed income instrument that represents a loan made by an investor to a borrower.
Call Option: A financial contract that gives the holder the right, but not the obligation, to buy an asset at a specified price within a specific time period.
Capital Market: A market in which individuals and institutions trade financial securities.
Certificate of Deposit (CD): A savings certificate with a fixed maturity date and specified interest rate.
Collateral: An asset that a borrower offers to a lender to secure a loan.
Commercial Paper: An unsecured, short-term debt instrument issued by a corporation.
Convertible Bond: A bond that can be converted into a predetermined amount of the company’s equity at certain times during its life.
Coupon Rate: The yield paid by a fixed income security.
Credit Default Swap (CDS): A financial derivative that allows an investor to “swap” or offset their credit risk with that of another investor.
Credit Rating: An assessment of the creditworthiness of a borrower.
Credit Spread: The difference in yield between two bonds of similar maturity but different credit quality.
Currency Swap: A financial instrument that involves the exchange of principal and interest in one currency for the same in another currency.
Debenture: A type of debt instrument that is not secured by physical assets or collateral.
Default: Failure to fulfill the obligations of a loan agreement.
Derivative: A financial security whose value is dependent upon or derived from an underlying asset or group of assets.
Discount Rate: The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve’s discount window.
Duration: A measure of the sensitivity of the price of a bond to a change in interest rates.
Equity: The value of an owner’s interest in a property or business, after deducting liabilities.
Exchange-Traded Fund (ETF): A type of investment fund and exchange-traded product, meaning they are traded on stock exchanges.
Face Value: The nominal value or dollar value of a security stated by the issuer.
Federal Funds Rate: The interest rate at which depository institutions trade federal funds with each other overnight.
Floating Rate Note (FRN): A debt instrument with a variable interest rate.
Forward Contract: A customized contract between two parties to buy or sell an asset at a specified price on a future date.
Futures Contract: A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future.
Hedge: An investment to reduce the risk of adverse price movements in an asset.
Hedge Fund: An investment fund that pools capital from accredited investors or institutional investors and invests in a variety of assets.
High-Yield Bond: A bond that is rated below investment grade by the major credit rating agencies.
Index Fund: A type of mutual fund with a portfolio constructed to match or track the components of a financial market index.
Initial Public Offering (IPO): The process of offering shares of a private corporation to the public in a new stock issuance.
Interest Rate Swap: A financial derivative contract in which two parties exchange interest rate cash flows.
Investment Grade: A rating that indicates that a municipal or corporate bond has a relatively low risk of default.
Junk Bond: A high-yield, high-risk security, typically issued by a company seeking to raise capital quickly.
Leverage: The use of various financial instruments or borrowed capital to increase the potential return of an investment.
LIBOR: The London Interbank Offered Rate, an average interest rate calculated from estimates submitted by the leading banks in London.
Liquidity: The ease with which an asset can be converted into cash without affecting its market price.
Market Capitalization: The total market value of a company’s outstanding shares of stock.
Money Market: A segment of the financial market in which financial instruments with high liquidity and short maturities are traded.
Mortgage-Backed Security (MBS): A type of asset-backed security that is secured by a mortgage or collection of mortgages.
Mutual Fund: An investment vehicle that pools money from many investors to purchase securities.
Nominal Interest Rate: The interest rate before taking inflation into account.
Option: A financial derivative that represents a contract sold by one party to another party.
Over-the-Counter (OTC): A decentralized market where securities not listed on major exchanges are traded directly between parties.
Par Value: The face value of a bond.
Portfolio: A range of investments held by a person or organization.
Preferred Stock: A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.
Prime Rate: The interest rate that commercial banks charge their most creditworthy customers.
Principal: The amount of money borrowed or invested, excluding interest.
Private Equity: Capital that is not listed on a public exchange.
Prospectus: A formal legal document that provides details about an investment offering for sale to the public.
Put Option: A financial contract that gives the holder the right, but not the obligation, to sell an asset at a specified price within a specific time period.
Quantitative Easing (QE): A monetary policy whereby a central bank buys government securities or other securities from the market to increase the money supply.
Rate of Return: The gain or loss on an investment over a specified period.
Real Interest Rate: The interest rate that has been adjusted to remove the effects of inflation.
Discount note: A discount note is a short-term debt obligation issued at a discount to its face value, similar to zero-coupon bonds and Treasury bills.

Money Market

Accrued Interest: Interest that has been earned but not yet paid.

Amortization: The process of gradually paying off a debt over a period of time through regular payments.
Arbitrage: The simultaneous purchase and sale of an asset to profit from a difference in the price.
Asset-Backed Security (ABS): A financial security backed by a pool of assets such as loans, leases, credit card debt, royalties, or receivables.
Banker’s Acceptance: A short-term debt instrument issued by a company that is guaranteed by a commercial bank.
Basis Point: One hundredth of a percentage point (0.01%).
Bid-Ask Spread: The difference between the highest price a buyer is willing to pay for an asset and the lowest price a seller is willing to accept.
Bond: A fixed income instrument that represents a loan made by an investor to a borrower.
Call Option: A financial contract that gives the holder the right, but not the obligation, to buy an asset at a specified price within a specific time period.
Capital Market: A market in which individuals and institutions trade financial securities.
Certificate of Deposit (CD): A savings certificate with a fixed maturity date and specified interest rate.
Collateral: An asset that a borrower offers to a lender to secure a loan.
Commercial Paper: An unsecured, short-term debt instrument issued by a corporation.
Convertible Bond: A bond that can be converted into a predetermined amount of the company’s equity at certain times during its life.
Coupon Rate: The yield paid by a fixed income security.
Credit Default Swap (CDS): A financial derivative that allows an investor to “swap” or offset their credit risk with that of another investor.
Credit Rating: An assessment of the creditworthiness of a borrower.
Credit Spread: The difference in yield between two bonds of similar maturity but different credit quality.
Currency Swap: A financial instrument that involves the exchange of principal and interest in one currency for the same in another currency.
Debenture: A type of debt instrument that is not secured by physical assets or collateral.
Default: Failure to fulfill the obligations of a loan agreement.
Derivative: A financial security whose value is dependent upon or derived from an underlying asset or group of assets.
Discount Rate: The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve’s discount window.
Duration: A measure of the sensitivity of the price of a bond to a change in interest rates.
Equity: The value of an owner’s interest in a property or business, after deducting liabilities.
Exchange-Traded Fund (ETF): A type of investment fund and exchange-traded product, meaning they are traded on stock exchanges.
Face Value: The nominal value or dollar value of a security stated by the issuer.
Federal Funds Rate: The interest rate at which depository institutions trade federal funds with each other overnight.
Floating Rate Note (FRN): A debt instrument with a variable interest rate.
Forward Contract: A customized contract between two parties to buy or sell an asset at a specified price on a future date.
Futures Contract: A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future.
Hedge: An investment to reduce the risk of adverse price movements in an asset.
Hedge Fund: An investment fund that pools capital from accredited investors or institutional investors and invests in a variety of assets.
High-Yield Bond: A bond that is rated below investment grade by the major credit rating agencies.
Index Fund: A type of mutual fund with a portfolio constructed to match or track the components of a financial market index.
Initial Public Offering (IPO): The process of offering shares of a private corporation to the public in a new stock issuance.
Interest Rate Swap: A financial derivative contract in which two parties exchange interest rate cash flows.
Investment Grade: A rating that indicates that a municipal or corporate bond has a relatively low risk of default.
Junk Bond: A high-yield, high-risk security, typically issued by a company seeking to raise capital quickly.
Leverage: The use of various financial instruments or borrowed capital to increase the potential return of an investment.
LIBOR: The London Interbank Offered Rate, an average interest rate calculated from estimates submitted by the leading banks in London.
Liquidity: The ease with which an asset can be converted into cash without affecting its market price.
Market Capitalization: The total market value of a company’s outstanding shares of stock.
Money Market: A segment of the financial market in which financial instruments with high liquidity and short maturities are traded.
Mortgage-Backed Security (MBS): A type of asset-backed security that is secured by a mortgage or collection of mortgages.
Mutual Fund: An investment vehicle that pools money from many investors to purchase securities.
Nominal Interest Rate: The interest rate before taking inflation into account.
Option: A financial derivative that represents a contract sold by one party to another party.
Over-the-Counter (OTC): A decentralized market where securities not listed on major exchanges are traded directly between parties.
Par Value: The face value of a bond.
Portfolio: A range of investments held by a person or organization.
Preferred Stock: A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.
Prime Rate: The interest rate that commercial banks charge their most creditworthy customers.
Principal: The amount of money borrowed or invested, excluding interest.
Private Equity: Capital that is not listed on a public exchange.
Prospectus: A formal legal document that provides details about an investment offering for sale to the public.
Put Option: A financial contract that gives the holder the right, but not the obligation, to sell an asset at a specified price within a specific time period.
Quantitative Easing (QE): A monetary policy whereby a central bank buys government securities or other securities from the market to increase the money supply.
Rate of Return: The gain or loss on an investment over a specified period.
Real Interest Rate: The interest rate that has been adjusted to remove the effects of inflation.
Repo Rate: The rate at which the central bank of a country lends money to commercial banks.
Repurchase Agreement (Repo): A form of short-term borrowing for dealers in government securities.
Risk: The potential for losing something of value.
Risk Management: The process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions.
Securities: Financial instruments that represent some type of financial value.
Securitization: The process of taking an illiquid asset or group of assets and, through financial engineering, transforming them into a security.
Short Selling: The sale of a security that the seller has borrowed.
Sovereign Debt: Debt issued by a national government.
Speculation: The act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay.
Stock: A type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings.
Swap: A derivative contract through which two parties exchange financial instruments.
Treasury Bill (T-Bill): A short-term government debt security with a maturity of less than one year.
Treasury Bond (T-Bond): A long-term government debt security with a maturity of more than ten years.
Treasury Note (T-Note): A government debt security with a maturity of between one and ten years.
Underwriting: The process by which investment banks raise investment capital from investors on behalf of corporations and governments that are issuing securities.
Variable Rate Demand Note (VRDN): A type of municipal bond with floating interest rates that are adjusted at specified intervals.
Volatility: A statistical measure of the dispersion of returns for a given security or market index.
Yield: The income return on an investment.
Yield Curve: A line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates.
Zero-Coupon Bond: A bond that does not pay interest during its life but is sold at a discount from its face value.
Asset Allocation: The process of dividing investments among different kinds of asset categories.
Bank Run: A situation in which many depositors simultaneously withdraw funds from a bank due to concerns about the bank’s solvency.

Promissory Note

Promissory Note: A legal financial instrument in which one party (the maker) promises in writing to pay a determinate sum of money to the other (the payee), either at a fixed or determinable future time or on demand of the payee, under specific terms.

Maker: The individual or entity that creates and signs the promissory note, thereby committing to repay the specified amount of money to the payee.
Payee: The person or entity to whom the promissory note is made payable, and who is entitled to receive the payment from the maker.
Principal: The original sum of money borrowed or the face value of the promissory note, excluding any interest or additional fees.
Interest Rate: The percentage of the principal charged by the lender to the borrower for the use of the money, typically expressed as an annual percentage.
Maturity Date: The specific date on which the principal amount of the promissory note, along with any accrued interest, is due to be paid in full.
Collateral: An asset or property pledged by the borrower to secure the repayment of the promissory note, which can be seized by the lender if the borrower defaults.
Secured Promissory Note: A promissory note that is backed by collateral, providing additional security to the lender in case the borrower fails to repay the debt.
Unsecured Promissory Note: A promissory note that is not backed by any collateral, relying solely on the creditworthiness and promise of the borrower to repay the debt.
Default: The failure of the borrower to meet the legal obligations of the promissory note, such as missing a payment or violating other terms of the agreement.
Acceleration Clause: A provision in the promissory note that allows the lender to demand immediate repayment of the entire outstanding balance if the borrower defaults on any terms of the note.
Amortization: The process of gradually repaying the principal and interest of a promissory note through regular, scheduled payments over the term of the loan.
Balloon Payment: A large, lump-sum payment due at the end of the loan term, after a series of smaller periodic payments have been made.
Negotiable Instrument: A written document guaranteeing the payment of a specific amount of money, either on demand or at a set time, which can be transferred to another party.
Holder in Due Course: A party who has acquired a promissory note in good faith, for value, and without notice of any defects or claims against it, and who has certain legal protections.
Endorsement: The act of signing the back of a promissory note to transfer ownership to another party, often accompanied by specific instructions or conditions.
Discounting: The practice of selling a promissory note for less than its face value before its maturity date, typically to raise immediate cash.
Usury: The illegal practice of charging an excessively high-interest rate on a loan, above the maximum rate allowed by law.
Grace Period: A specified period after the due date during which the borrower can make a payment without incurring late fees or penalties.
Demand Promissory Note: A promissory note that is payable on demand by the lender, meaning the lender can request repayment at any time.
Installment Note: A promissory note that is repaid in regular, scheduled installments over a specified period, typically including both principal and interest.
Prepayment Penalty: A fee charged to the borrower for paying off the promissory note before its maturity date, intended to compensate the lender for lost interest income.
Promissory Note Agreement: The formal contract that outlines the terms and conditions of the promissory note, including the principal, interest rate, repayment schedule, and any other relevant details.
Recourse: The right of the holder of the promissory note to seek payment from the maker or endorsers if the note is not paid as agreed.
Non-Recourse: A type of promissory note where the holder has no claim against the maker or endorsers if the note is not paid, limiting the holder’s ability to recover the debt.
Convertible Note: A promissory note that can be converted into equity in the issuing company, typically under specific conditions or at a predetermined conversion rate.
Subordination Agreement: An agreement that ranks one debt below another in priority for collecting repayment, often used in complex financing arrangements.
Lien: A legal right or interest that a lender has in the borrower’s property, granted until the debt is satisfied, which can be used to secure repayment.
Promissory Note Template: A pre-formatted document used to create a promissory note, typically including standard terms and conditions that can be customized as needed.
Loan Agreement: A contract between a borrower and a lender outlining the terms of the loan, including the amount, interest rate, repayment schedule, and any other relevant details.
Interest-Only Note: A promissory note where only interest payments are made periodically, with the principal due in full at the maturity date.
Fixed-Rate Note: A promissory note with an interest rate that remains constant throughout the term of the loan, providing predictable payments.
Variable-Rate Note: A promissory note with an interest rate that can change over time, typically based on an underlying benchmark or index.
Covenant: A clause in a promissory note that requires the borrower to meet certain conditions or perform specific actions, often related to financial performance or asset maintenance.
Debenture: A type of debt instrument that is not secured by physical assets or collateral, relying on the creditworthiness and reputation of the issuer.
Promissory Note Issuance: The process of creating and distributing promissory notes, often as part of a financing arrangement or debt issuance.
Loan Origination: The process by which a borrower applies for a new loan, and a lender processes that application, including underwriting and approval.
Creditworthiness: An assessment of the likelihood that a borrower will default on their debt obligations, based on their financial history and current situation.
Debt Instrument: A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with the terms of a contract.
Repayment Schedule: A detailed plan outlining how and when the borrower will repay the loan, including the amounts and due dates of each payment.
Interest Accrual: The process of accumulating interest on the principal amount of the promissory note, typically calculated on a periodic basis.
Loan Servicing: The administration of a loan from the time the proceeds are disbursed until the loan is paid off, including collecting payments and managing accounts.
Promissory Note Holder: The person or entity that holds the promissory note and is entitled to receive payment from the maker.
Debt Restructuring: A process that allows a borrower to reduce and renegotiate delinquent debts to improve or restore liquidity and avoid default.
Promissory Note Default: The failure to meet the legal obligations of the promissory note, such as missing a payment or violating other terms of the agreement.
Loan Modification: A change made to the terms of an existing loan by a lender, often to make repayment more manageable for the borrower.
Promissory Note Assignment: The transfer of rights and obligations of a promissory note from one party to another, often through endorsement or sale.
Promissory Note Maturity: The date on which the promissory note must be repaid in full, including both principal and any accrued interest.
Promissory Note Renewal: Extending the term of a promissory note beyond its original maturity date, often under new terms and conditions.
Promissory Note Repayment: The act of paying back the borrowed amount as per the terms of the promissory note, including both principal and interest.
Promissory Note Security: Collateral or other forms of security provided to ensure repayment of the promissory note, reducing the lender’s risk.
Promissory Note Terms: The specific conditions and clauses outlined in the promissory note, including the principal, interest rate, repayment schedule, and any other relevant details.
Promissory Note Valuation: The process of determining the value of a promissory note, often based on the present value of future cash flows.
Promissory Note Verification: The process of confirming the authenticity and terms of a promissory note, often as part of due diligence or loan processing.
Promissory Note Write-Off: The process of removing a promissory note from the books when it is deemed uncollectible, often as a result of default or bankruptcy.