Question

1. when you apply for a loan, there are a few financial terms you need to become familiar with. google the following financial terms and define them below.

a. principal of a loan

b. opening balance

c. repayment

d. closing balance

e. interest

f. interest per annum

g. simple interest

h. hire purchase

i. stamp duty

j. deposit

Explanation:

Define core loan balance terms

We define the initial amount borrowed and the starting balance of a period.

• Principal of a loan: The original sum of money borrowed, excluding interest.
• Opening Balance: The amount of money in an account at the start of a tracking period.

Define transaction and ending terms

We define the payments made and the final balance of a period.

• Repayment: A regular payment made to pay back a debt.
• Closing Balance: The amount of money in an account at the end of a tracking period.

Define interest-related terms

We define the cost of borrowing money over time.

• Interest: The fee charged by a lender for borrowing money.
• Interest per annum: The yearly interest rate charged on a loan.
• Simple Interest: Interest calculated only on the original principal amount.

Define purchasing and tax terms

We define specialized buying methods, government fees, and initial payments.

• Hire purchase: A system where a buyer pays in installments while using the asset.
• Stamp duty: A government tax levied on legal documents and transactions.
• Deposit: An initial partial payment made to secure a purchase or loan.

Answer:

a. Principal of a loan: The original amount of money borrowed, before any interest is added.

b. Opening Balance: The amount of money in a financial account or loan at the start of a specific accounting period.

c. Repayment: A scheduled payment made by a borrower to a lender to pay down the outstanding balance of a loan.

d. Closing Balance: The final amount of money remaining in a financial account or loan at the end of a specific accounting period.

e. Interest: The cost of borrowing money, typically expressed as a fee or charge paid by the borrower to the lender.

f. Interest per annum: The annual rate of interest charged on a loan or earned on an investment.

g. Simple Interest: A quick method of calculating interest charge where interest is determined solely on the original principal amount.

h. Hire purchase: A buying arrangement where a customer makes an initial down payment and pays the remaining balance plus interest in installments, obtaining ownership only after the final payment.

i. Stamp duty: A state or local government tax imposed on certain legal documents and transactions, such as purchasing property or vehicles.

j. Deposit: A sum of money paid upfront as an initial installment to secure the purchase of an item or to initiate a loan.