Glossary Letter: B

A bridge loan is a short-term loan used to provide temporary financing until a more permanent solution is secured. Often utilized in real estate transactions, it helps bridge the gap between the sale of an existing property and the purchase of a new one. Bridge loans typically have higher interest rates and shorter terms compared… Continue reading Bridge Loan

Bankruptcy is a legal process through which individuals or businesses that are unable to repay their debts seek relief from some or all of their liabilities. It is typically initiated through a court filing and can lead to the liquidation of assets or a reorganization of debts. Bankruptcy can significantly impact credit scores and financial… Continue reading Bankruptcy

A Basis Point (BP) is a tiny unit used to express interest rate changes. It’s equal to 1/100th of 1%, so 1 bp = 0.01%. Basis points are commonly used to express changes in interest rates, bond yields, and other percentages in financial contexts to avoid ambiguity.  For example, if an interest rate increases from… Continue reading Basis Point

Borrower default refers to a situation where a borrower fails to make their required loan payments as agreed upon in the loan contract. It occurs when the borrower becomes delinquent and stops making timely payments of principal, interest, or both. When a borrower defaults, the lender may take legal action to recover the owed amount,… Continue reading Borrower Default

A balloon payment is a large lump sum payment due at the end of a specific loan term, typically for certain loan products like auto loans or home equity loans. Unlike traditional fully amortized loans, where payments gradually reduce the principal balance, balloon payments require a significant final payment to settle the remaining loan amount.… Continue reading Balloon payment