Glossary

Loan Glossary

Here is your glossary of all the commonly used terms of the financial lending industry which you may come across in your journey of getting a loan –

A

  • Acceptance- It refers to the borrower’s consent to the terms and conditions of the loan agreement which includes the amount of the loan, its type, interest rate as well as the repayment period of the loan. This is also known as loan acceptance.
  • Accrued Interest- It refers to the interest amount that has accumulated over a loan for a particular period of time but has not been paid by the borrower.
  • Advance Disbursement- In the context of home loans, an advance disbursement of loan refers to the transfer of the loan amount by the lender to the borrower before the complete construction of the building. This is also known as part disbursement.
  • Amortization- It refers to the process of repayment of a loan in a scheduled manner with a predetermined number of instalments including a part of the principal amount and interest.
  • Amortization Schedule- It refers to a table that outlines the periodic payments on an amortization loan. It also mentions the breakup of the amount of principal and the amount of interest that together make the due EMI until the loan is paid off at the end of its term.
  • Amortization Term- It refers to the total time period allowed to the borrower to repay the loan. The length of the term depends on the amount of EMI to be paid by the borrower.
  • Application Fee- It refers to the charges that are levied by the lender for the processing of the loan.
  • Appraisal- It refers to the inspection of a loan application to determine the ability of the borrower to return the loan within a particular loan term. Different lenders use different appraisal methods. This is also known as loan appraisal.
  • Approved Term- It refers to a term in the loan agreements that has been mutually and officially consented to by the borrower and the lender. It is also known as a sanctioned term.
  • Assessor- It refers to an individual or enterprise that evaluates a loan application based on the borrower’s credit record and credit score among other factors.
  • Asset- It refers to a resource that is owned by an individual or an enterprise and has an economic value. It is pledged as collateral by the borrower at the time of taking a loan.
  • Assessed Value- It is the monetary value of an asset that is determined by a loan assessor during its inspection to evaluate its worth as a collateral for the proposed loan application. It is also known as fair market value.
  • Automatic Payment- It is a loan repayment option that ensures that the due EMIs get deducted automatically from the bank account of the borrower without any manual intervention. This is also known as auto debit. This facility gets implemented with the help of the National Automated Clearing House (NACH) of the National Payments Corporation of India (NPCI). It is a web-based solution which facilitates Banks, Financial Institutions, Corporates, and Government to do high volume electronic transactions in a repetitive and periodic manner.

B

  • Balance Sheet- It is a summarised statement of the financial balances of an individual or enterprise’s assets and liabilities at a particular point of time. It gives a snapshot of the financial position of the said individual or enterprise.
  • Balance Transfer– This refers to the process of transferring the outstanding principal amount of a loan from the current lender to a new one. This is usually done when better rates of interest or features are available.
  • Balloon Payment- It refers to a lump sum amount paid at the end of a loan term. It is significantly larger than all the previous monthly amounts paid by the borrower during the term of the loan.
  • Bank Overdraft- It refers to a line of credit which is allowed to the borrower by the lender when the balance in the former’s bank account is zero. It is an added facility provided by the lender to the borrowers who have a good credit worthiness. Bank overdraft generally carries an interest rate and an overdraft fee.
  • Base Rate– It is the minimum interest rate set by the Reserve Bank of India (RBI) below which no bank can offer a loan to borrowers.
  • Beneficiary- It refers to the person or an entity in whose name the loan has been sanctioned by the lender.
  • Bond- It is a fixed income financial instrument that represents a loan. The issuer of a bond is the borrower who gets a loan amount from the holder of the bond (the lender) in return for the bond certificate. It carries a fixed rate of interest.
  • Borrower- It refers to a person or an entity that has taken money from a lender with a promise to repay the borrowed amount within a specific period of time. For the usage of the borrowed funds, the borrower pays an additional amount known as the interest on loan to the lender.
  • Break Even Point- It is the point at which the total fixed cost of a business is equivalent to the total revenue generated by it. It is also known as no profit no loss point.
  • Bridge Loan- It is a type of loan that is taken by the borrower for a short period of time while arranging for long-term financing. It is also known as a caveat loan or a swing loan.
  • Broker- It refers to an entity or an individual that acts as an intermediary and arranges a deal between the lender and borrower in exchange of a commission. The amount of commission usually depends on the value of the transaction.
  • Business Plan- It is a formal written document that describes the nature of the business of an enterprise, its operational and financial objectives and the time frame within which it plans to achieve them. It is a roadmap for achieving the vision of the enterprise.

C

  • Capital- It refers to the funds or assets available to an individual or entity for investment purposes. Primarily, there are four types of capital namely debt capital, equity capital, working capital and trading capital. It can be either in the form of cash or assets.
  • Cash Credit- It refers to a short-term loan which is availed by the borrower for meeting working capital requirements. It is usually provided on the basis of hypothecation of stocks or inventory.
  • Cash Flow- It is the movement of cash and its equivalents either into or out of a business. If cash or its equivalents come into the enterprise, it is known as cash inflow and if it is being paid out, it is called cash outflow.
  • Cash Flow Statement- It is a financial statement which summaries the amount of cash inflows and cash outflows of an enterprise. It shows how well a company manages its cash reserves.
  • Client Personal Verification- It is the assessment and verification of existing as well as potential clients of a lender in order to determine their creditworthiness and the associated risk of the lender. It is done by various independent methods such as physical inspections; background verification checks as well as references check.
  • Collateral- It refers to the asset pledged by the borrower in order to secure the loan from the lender. Collaterals include personal property such as private vehicles, equipment, property etc. The lender reserves the right to possess the collateral if the borrower fails to repay the loan by the end of the repayment period.
  • Commercial Paper- It is an unsecured short-term debt instrument that is issued in the form of a promissory note by a company. It is usually used for meeting immediate financial needs like funding of inventories and clearing payrolls. It comes with a maturity period of minimum 7 days which can go up to a maximum of 1 year from the date of issue.
  • Creditor- It refers to an individual or entity to whom a borrower owes money. It is also known as a lender.
  • Credit Agency- It is an organisation that assesses the financial strength of the borrower to determine their eligibility for the repayment of a loan in time.
  • Credit Appraisal– It refers to the thorough examination of a loan application to determine the ability of the borrower to return the loan in a stipulated time. Different lending agencies may have different appraisal methods to determine the credit worthiness of the borrower.
  • Credit History– It is a record of the borrower’s ability to repay credit. It includes information such as total debt loan in the name of the borrower, number of credit lines, their repayment timelines, credit default instances, etc.
  • Credit Limit- It refers to the maximum amount of credit that a lender has allowed to a borrower.
  • Credit Report– It is a comprehensive statement/summary of the credit activity of the borrower. It highlights the current credit situation of the borrower including their repayment history, number of credit accounts, etc. to help the lender assess their credit repaying ability.
  • Credit Score– It is a number that indicates the creditworthiness of a borrower. It ranges between 300 and 900 and is determined on the basis of the borrower’s credit behaviour as reflected in the ‘Accounts’ and ‘Enquiries’ section of their Credit Information Report (CIR). A score above 700 is generally considered good. The higher the credit score, the better are the chances of loan approval by the lender. The credit score of a borrower also depends on the monthly or annual income details as reported by the banks and financial institutions.
  • Credit Worthiness- It refers to the ability of the borrower to repay the loan. It helps the lender to assess if the loan should be given to the borrower or not. The credit worthiness is affected by the borrower’s credit score, report and credit history.
  • Current Asset- It is an asset that can be sold or converted to cash within a year. Some of the common examples of current assets are marketable securities, inventory, cash equivalents, etc.
  • Current Liability- It refers to the debt of the borrower that is to be repaid to the lender (creditor) within a year’s time. Some common examples of current liabilities include commercial paper, payroll liabilities, taxes, raw material, creditor payments, etc.
  • Current Ratio- It refers to the ratio of the total current assets of an individual or entity to its total current liabilities. It measures the ability of the borrower to repay short-term liabilities which are due within a year. A good current ratio is between 1.2 to 2. A current ratio of 2 means that the business has 2 times more current assets than liabilities to cover its debts. Whereas, a current ratio below 1 means that the company doesn’t have enough liquid assets to cover its short-term liabilities. A current ratio that is in line with the industry average or slightly higher is generally considered acceptable as a current ratio that is lower than the industry average may indicate a higher risk of distress or default.

D

  • Debenture- It is a medium to long-term debt instrument that is usually used by large enterprises and governments to borrow money. It features a fixed rate of interest. There are various types of debentures such as Convertible and Non-Convertible, Secured and Unsecured, Registered and Bearer, etc.
  • Debt- It refers to the amount that the borrower owes to the lender.
  • Debtor- A debtor is an individual or entity who owes money to a lender.
  • Debt Consolidation- It is the act of taking a single loan for the payment of multiple debts including credit cards, loans, creditors, etc.
  • Debt Consolidation Loan– It is a type of loan which helps you pay all your existing loans by taking a fresh single loan. These loans help you manage your EMIs effectively and usually have a relatively lower interest rate.
  • Debt Equity Ratio- It is the ratio of the total liabilities of an entity or individual to their total shareholder’s equity. It is used to evaluate the borrower’s financial leverage. A good Debt Equity ratio ranges between 1 to 2. A Debt Equity ratio of 1 means the company uses INR1 debt for every INR 1 equity i.e. the entity’s debt level is 100% of equity. The higher the ratio, the business is considered more risky.
  • Debt-To-Income Ratio (DIR)- It refers to the ratio of a borrower’s total monthly income to total monthly debt payments. It helps a lender to assess the borrowing risk.
  • Default– This is a situation wherein the borrower has missed or failed to make their debt repayments. A loan default usually occurs if subsequent payments over a period of time have not been made by the borrower.
  • Deferment- It refers to the act of postponing the repayment of the loan by the borrower after receiving an approval from the lender for the postponement.
  • Deferred Interest- It refers to an interest amount which occurs when a lender offers a period during which interest is accrued but not charged. If the borrower does not repay the loan till the end of such a period, the accrued interest becomes payable from the date of issuance of loan.
  • Delinquency- It refers to the non-repayment of a loan by the borrower in the pre-decided time frame.
  • Direct Expenses- These are the expenses that are incurred by a business directly for the production of goods and services offered by it. Some common examples of direct expenses are purchase of raw material, labour wages, factory rent, etc.
  • Disbursement- This refers to the actual transference of the loan amount to the borrower by the lending organisation by way of a direct bank transfer.
  • Disclosure Statement- It is an official document that states all the terms, conditions, risks, and rules of a loan transaction. It includes the loan amount, interest rate, loan term, and any fee which may be applicable.
  • Diversion of Funds- This refers to the act of using the loan funds for purposes other than the ones which were sanctioned or approved at the time of issuance of the loan by the lender.
  • Dividend- It is a part of a company’s profits and retained earnings which are paid out by it to its certain class of shareholders. It is given out as a fixed amount per share.
  • Down Payment- It refers to the initial partial payment which is made upfront as a part of the total payment for an asset purchased on credit.
  • Drawing Power- It refers to the limit up to which an individual or entity can withdraw from the sanctioned working capital limit.
  • Drop Line Overdraft (OD)- It refers to the facility extended by a lender wherein the borrower can overdraw cash from the current account up to a pre-decided limit. The sanctioned limit gets dropped over a period of time, in some cases the drop is monthly, while some banks offer an annual drop. It is an efficient way of borrowing as the interest on the availed credit is to be paid only for the time during which the credit is used. It is also known as Home Saver, Home Assist, etc.
  • Due Diligence- It refers to the efforts which are required to make a reasonable decision basis complete collection and analysis of available information and resources.

E

  • EBITDA- It is the acronym for Earnings Before Interest, Taxes, Depreciation, and A It refers to the total revenue of a business after deduction of the operating expenses.
  • EMI- An Equated Monthly Instalment (EMI) refers to a fixed monthly repayment of a loan by the borrower to the lender for a pre-decided period of time. The EMI has to be paid on a specified date of each calendar month. The value of the EMI depends on the loan amount, repayment period and the rate of interest at which the loan has been taken.
  • End Use- It refers to the purpose for which the borrower used the loan sanctioned by the lender.
  • Equity – It is the amount owned or invested by the owner of the company in the business. It can be calculated as the difference between the assets and liabilities of a company.
  • Escrow- It refers to a contractual agreement under which a third party temporarily holds the assets of a transaction between two parties. The assets are released by the third party when all the terms of the agreement mutually decided by both the parties get fulfilled.

F

  • Field Investigation- It is a part of the loan issuance process wherein the lender verifies the borrower’s home address, workplace association, personal documents like Aadhaar Card, PAN, Passport, etc. to validate the details shared by the borrower in the loan application.
  • Financial Leverage- It refers to the use of borrowed funds for the acquisition of new assets with an aim to generate relatively higher capital gains as compared to the cost of borrowing.
  • Fixed Assets- These are the assets which are purchased with a long-term investment perspective and cannot be easily converted into cash quickly. Some common examples of fixed assets include plant and machinery, buildings, land, vehicles, etc.
  • Fixed Cost- It refers to the cost which is incurred irrespective of the volume of production of goods and services by an enterprise. It is incurred even when there is no production. It is also known as overhead costs. Some common examples of fixed costs are factory rent, insurance cost, depreciation of assets, etc.
  • Fixed Interest Rate- It is an unchanging rate of interest applicable throughout the loan term or a specified period of the term, depending on prior agreement between the lender and the borrower.
  • Floating Interest Rate- It is a variable interest rate that keeps changing during the term of the loan. The interest rate is usually dependent on a reference index or market trends.
  • Foreclosure- It refers to the legal process by which the lender takes ownership and tries to sell the loan collateral in order to recover the debt amount owed by the borrower. It usually initiates when the borrower fails to make the repayment of a specific number of EMIs, but it can also get initiated in case a term of the loan agreement gets dishonoured. Foreclosure is also known as Auction of Property.
  • Full Disbursement– It refers to the complete payment of the loan amount by the lender to the borrower in one go as a lump sum.
  • Fund Flow Statement- It is a statement of inflows and outflows of funds. It is prepared to analyse the reasons for change in the financial position of an individual or entity between two periods.

G

  • Grace Period- It refers to the time period after the loan repayment due date during which the borrower is allowed to make the due repayment to the lender without incurring any late payment charges.
  • Guarantor- It refers to an individual who promises to pay the loan amount in case the original borrower fails to do so.

H

  • Home Construction Loan- It is a type of term loan that is used to finance the construction of a private residence.
  • Home Improvement Loan- It is a type of loan availed for the purpose of remodelling or repairing a private residence. It is a secured loan and is taken against the home (for which the improvement is planned) as a mortgage. It is also known as a Home Renovation Loan.
  • Home Loan Balance Transfer- It refers to a process under which the borrower shifts their home loan from the existing lender to a new lending institution. This is usually done for better rate of interest and in cases where the borrower has an additional loan top-up requirement which is not being fulfilled by the current lender.

I

  • Indirect Expenses- These are the expenses which are incurred by an enterprise for daily business operations. Some common examples of indirect expenses include freight, insurance, factory rent, etc.
  • Inter Corporation Deposit (ICD)- It is a type of short-term unsecured deposit which is made by one company to another based on personal agreements.
  • Interest Rate- It refers to a certain percentage of the loan amount which the borrower is required to pay to the lender as the cost of availing the loan.
  • Interim Collateral- It refers to a collateral which is mortgaged by the borrower with the lender for an interim period of time till the permanent security is provided.
  • Interim Financing- It refers to a short-term loan that is availed by the borrower while arranging for a long-term loan. This is also known as a bridge loan.
  • Intermediaries- This refers to entities that act as a bridge between the lenders and the borrowers to facilitate the financial transaction.
  • Issued Capital- It is a part of the authorized share capital of a company which is issued to its shareholders.

J

  • Joint Loan- It refers to a loan where there are two beneficiaries involved in the repayment of the debt.

L

  • Late Fee- It refers to the charge levied on the borrower for failure to make the loan repayment by the pre-decided due date. Incurrence of a late fee can adversely affect credit records.
  • Late Payment- It refers to the repayment of the debt by the borrower to the lender after the pre-agreed due date.
  • Land Purchase Loan- It is a type of loan that is provided to the borrower by the lender to facilitate the purchase of a land. It is also known as a plot purchase loan.
  • Lender- It refers to the individual, entity or enterprise that lends out a certain sum of money to an interested borrower with the agreement that that the availed loan will be repaid over a certain period of time along with an interest on the borrowed amount.
  • Leverage- It refers to usage of borrowed funds to finance a project or purchase, instead of using equity or owned cash. This is done with the goal of increasing returns.
  • Line of Credit- It refers to the upper limit of money which the borrower can take from the lender. Under the line of credit system, instead of taking the entire loan amount at once, the borrower takes smaller amounts from the entire fund at different time intervals.
  • Loan Agreement- It refers to the official document that outlines the mutual agreement between the lender and the borrower regarding the terms and conditions of the loan.
  • Loan Fee- It is the cost charged by a lender to the borrower to cover the expenses incurred during the processing of a loan. It needs to be paid upfront by the borrower. It is also known as processing fee.
  • Loan Limit- It is the maximum amount of loan that a borrower can take from a lender. It depends on the financial profile of the borrower and factors such as their credit record, credit history, etc.
  • Loan Prepayment- It refers to the situation when the borrower repays the loan amount before the end of the loan term. This may be done in part or completely and usually attracts a loan prepayment fee.
  • Loan Term- It refers to the specific period of time for which the loan has been granted to the borrower. It is the period over which the borrower has to repay the loan to the lender with an interest on the borrowed amount.
  • Loan to Value Ratio- It refers to the ratio of the loan borrowed to the value of the asset pledged by the borrower against it.
  • Login- When the loan application is duly filled and submitted by a borrower with the required documentation a loan application is considered completed and submitted by the lending institution. Following the completion of the loan application, the bank or the NBFC initiates the process of login. Once the file is logged a LAN (Loan Application Number) is generated.
  • Long-Term Loan- It is a type of loan that is taken for a long period of time, usually three or more years.

M

  • Margin- It is the difference between the amount of money borrowed and the collateral that has been secured by the lender under the loan.
  • Market Rate- It depicts the rate of interest at which funds can be borrowed under prevailing market conditions.
  • Moratorium- It refers to the period during which the borrower is not required to pay the EMIs of the loan to the lender. However, interest continues to get accrued on the outstanding portion of the loan and is payable by the borrower after the end of the moratorium period.

N

  • Net Profit- It is the total earnings of an enterprise after all its expenses have been deducted from its revenue. This amount of net profit can be utilised to either distribute dividends among the shareholders or can be retained in the business for future use.
  • Net Working Capital- It is the difference between an enterprise’s total current assets and total current liabilities. It helps a lender in determining the ability of an entity to honour its current financial obligations.
  • Net Worth- It is the total financial worth or wealth of an entity or individual. It is calculated by considering all their assets as well as their liabilities.
  • Non-Recourse Loan- It refers to a loan which is secured by a collateral. The lender may seize the collateral in case of failure of repayment of the loan. However, in such a case, the borrower does not remain personally liable and may provide no further compensation if the collateral does not cover the value of the debt.
  • Non-Tangible Assets- It refers to such assets that do not have a physical form but have a financial value attached to them. Some of the common non-tangible assets include patents, trademarks etc.

O

  • Offer Letter- It is a written statement that specifies the amount that the lender is willing to give to the borrower. The loan amount specified in the offer letter can be less than, equal to, or more than what had been originally requested by the borrower. The offer letter also mentions other loan related terms such as the rate of interest, the loan term, details of collateral (if any), processing fee, etc.
  • Operating Leverage- It refers to the proportion of fixed cost in the total cost of a business. It helps an enterprise determine to what degree they can increase their operating income through an increase in revenue.
  • Opportunity Cost- It is a non-accounting cost which depicts the value/benefit of the next best alternative forgone due to choosing some the chosen option. For instance, if you leave a job to start a business, then the opportunity cost of starting the business is the salary which you would have earned by doing the said job.
  • Origination Fee- It is the charge levied by the lender when they enter into an agreement with the borrower. It is levied to cover the costs of processing the loan and has to be paid upfront by the borrower.

P

  • Paid-Up Capital- It is the capital or the amount that an enterprise has received through the issue of its shares to the shareholders.
  • Partial Disbursement- When a lender gives out the loan amount to the borrower in parts, it is known as partial disbursement.
  • Payday Loans- These loans are high-interest loans that are lent out for a short period of time with the assurance that they will be repaid once the borrower receives their due remuneration. It is a high-cost loan that helps borrowers cover immediate goals and needs.
  • Penal Interest- It refers to the rate of interest that is imposed by the lender on the borrower for non-repayment of debt as per the agreed terms. It is charged over and above the existing interest rate and principal liability of the borrower.
  • Portfolio- It refers to the collection of financial assets and investments held by an individual or entity at a point in time. It usually includes stocks, bonds, cash, properties, etc.
  • Post Dated Cheque- It is a type of cheque which is issued by the payer for a future date. These cheques cannot be cashed before the future date mentioned on them.
  • Pre-Approved Property- It refers to a pre-appraised property by a lender for loan purposes. Such a property enables the borrower to enjoy benefits such as faster loan approval. It is usually provided to borrowers who have a good credit score and credit history.
  • Pre-Closure- It refers to a situation when the borrower decides to close the loan account or end the loan tenure before the stipulated loan term.
  • Pre-EMI- It is the monthly repayment towards only the interest that has been generated as a result of the loan. It does not include payment towards the principal amount of the loan.
  • Prepayment Fees- It refers to the charge levied on the borrower for paying off the entire loan or a part of it before the pre-decided due date.
  • Principal Amount- It refers to the original sum of money granted by the lender to the borrower.
  • Profit and Loss- It is called profit when the selling price of a commodity or an asset is more than the cost price and as a result, there is a net gain to a company or an individual. It is called a loss when the cost price is more than the selling price of the commodity or asset.
  • Promissory Note- It is a legal document that outlines an agreement between two entities wherein one of them is liable to pay a certain sum of money to the other under certain terms and conditions. It can feature a fixed period of time for the repayment or can be repayable on demand of the borrower or left to be determined in the future.
  • Public Deposits- These are deposits that are made by the general public on receipt of a request from a company.

R

  • Receivables- It is the amount of money that a lender has to receive from a borrower.
  • Repayment Schedule- It refers to a schedule outlining the periodic payments to be made by the borrower to the lender for a particular loan or credit. It contains information such as repayment due dates, interest rates etc.
  • Resale Property- It refers to a property that was initially bought by some individual or entity and is now being resold by them to a new owner or a buyer.
  • Reserve– It refers to the fund created for a specific future use, like contingency or expected bad debts. Funds are added/withdrawn from the reserve as deemed fit by the company during the course of time.
  • Restructure- It refers to altering the terms and conditions of a loan upon agreement by both the lender and the borrower. It is usually done to provide more favourable conditions for the borrower when the lender feels the risk of a bad debt.

S

  • Sales- It refers to the monetary value of products and/or services sold by an enterprise or individual. It is also known as the Revenue and Turnover.
  • Secured Loan- It refers to a loan secured by a collateral or guarantor. Under this type of loan, the lender secures the right to seize the collateral in case the borrower fails to repay the loan in due time.
  • Security– It is the asset that the borrower pledges to the lender for availing a loan. It can be used by the lender for recovering the loan amount if the borrower defaults the repayment of the loan. Security is usually given in the form of financial assets or real estate.
  • Share Capital – It refers to the funds raised by a company through issue of common and preferred stocks. The amount of share capital of a company can fluctuate depending upon future sale of additional shares.
  • Short-term Loan- It is a type of loan that is used to finance a temporary venture or financial requirement of an entity or individual. It has a short repayment period which is usually less than a year from the date of issuance of the loan.
  • Society- A society is a legal entity governed by the Society Registration Act, 1860 which defines it as “an association or company of persons united by mutual consent, to deliberate, determine, and act jointly for a common purpose”. There exists a democratic control in a society where decisions are taken by voting.
  • Soft Credit Check- It refers to an enquiry about the credit score of the borrower either by themselves or by a financial institution. It does not affect the credit score of the borrower and can be done even without applying for credit.
  • Stock- It refers to materials and goods that an enterprise holds with the aim of selling or utilising them for monetary gains. It is also known as inventory.
  • Subscribed Capital- It refers to that portion of the issued share capital which has already been subscribed for by potential investors of a company. It is released to the subscribers when shares are finally issued by the company.

T

  • Tangible Assets- These are assets that have a certain monetary value attached to them and are present in a physical form.
  • Tenure- It refers to the amount of time that the borrower is given by the lender to repay a particular loan.
  • Term Loan- It is the type of loan where a fixed amount is lent based on a fixed repayment schedule as per which regular repayments have to be made by the borrower either at a fixed or a floating interest rate. Term loans are extended for a long period of time.
  • Top-Up Loan- It is a type of loan that is lent over an existing loan. It is usually given over a home loan or a personal loan, given that the borrower has a good credit record and high credit worthiness.
  • Trust- It is a legal entity that acts as a fiduciary, trustee, or agent on behalf of an individual, group of individuals or business for administering, managing, and transferring assets to a beneficial party.

U

  • Unsecured Loan- It refers to a loan which is not secured with a collateral. However, a personal guarantee is required. There is no protection available to the lender in case the borrower fails to repay the loan by the end of the loan term.

V

  • Variable Cost- It is a type of cost which is dependent upon the volume of the output produced of an enterprise for a particular product or service. It positively and directly depends on the volume of generated output, i.e., with an increase in the output, the total variable cost increases and vice versa.

W

  • WACC- It stands for Weighted Average Cost of C It refers to an enterprise’s cost of capital in different categories weighed proportionately.
  • Working Capital Gap- It refers to the difference between the total current assets and the total current liabilities except the borrowings for the working capital.
  • Working Capital Loan- It is a type of short-term loan that is taken by an enterprise to provide for its day-to-day financial needs. This type of loan is not supposed to be used for long-term goals or investments.