MBA Integrated Companies

Loans have many facets  and terminology associated with them. Some of the terminology includes the following:

1. The LENDER is the person or company loaning the money.
2. The BORROWER is the person wishing to receive the money from the lender.
3. The PRINCIPAL is the total amount of money  the lender loans to the borrower
4. The RATE is the interest rate charged by the lender to the borrower
5. The TERM is the period of time the lender agrees to loan the money to the 
    borrower.
6. The PAYOFF is the point in time when the full amount of the loan plus interest 
    has been repaid to the lender.
7. The PAYMENT is the periodic money given to the lender for the repayment
    of the principal plus the interest.

Typically during the term of a loan, the lender realizes a sizeable amount of money over the term of the loan. The general rule in the early period of the loan the lender will realize a 20:1 ratio of money from the monthly payments. In other words, for each $1.00 you receive credit for in the monthly payment, the lender recreives $20.00. Refer to the tab labeled Mortgage Payoff , Standard Amortization Table to compare the payment versus the interest applied to the principal. That ratio is approximately 20:1.