Outstanding or Remaining Balance
The outstanding balance, or remaining balance, on a loan refers to the total amount of money that a borrower still owes to the lender at a specific point in time. This balance includes the remaining principal that has not yet been paid back, and it may also encompass any accrued interest or fees, depending on the loan structure.
The outstanding balance decreases over time as payments are made. In amortizing loans, each payment is typically divided into interest and principal, gradually reducing the outstanding balance.
An amortization schedule can provide a detailed view of the loan's payment structure, showing how much of each payment goes toward interest and how much goes toward reducing the outstanding balance. It will also indicate the outstanding balance after each payment.
Calculating the Outstanding Balance
If you know the original loan amount, the interest rate, the term length, and the number of payments made, you can calculate the outstanding balance at any point during the loan term.
Example
Suppose a borrower takes out a loan of $200,000 with a 4% interest rate and a 30-year term. Let’s say the monthly payment is calculated to be approximately $955.
If the borrower has made payments for 5 years, they will have made 60 payments. At this point, the outstanding balance might be around $180,000 (this value depends on the exact interest calculation and the specific payment structure).
Ultimately, tracking the outstanding balance on a business loan is essential for managing cash effectively and planning for future payments.
Financial Glossary
Use Lighter Capital's glossary to understand common terms used in finance and investing, so you can build financial literacy and make informed decisions for your startup.
Outstanding or Remaining Balance
The outstanding balance, or remaining balance, on a loan refers to the total amount of money that a borrower still owes to the lender at a specific point in time. This balance includes the remaining principal that has not yet been paid back, and it may also encompass any accrued interest or fees, depending on the loan structure.
The outstanding balance decreases over time as payments are made. In amortizing loans, each payment is typically divided into interest and principal, gradually reducing the outstanding balance.
An amortization schedule can provide a detailed view of the loan's payment structure, showing how much of each payment goes toward interest and how much goes toward reducing the outstanding balance. It will also indicate the outstanding balance after each payment.
Calculating the Outstanding Balance
If you know the original loan amount, the interest rate, the term length, and the number of payments made, you can calculate the outstanding balance at any point during the loan term.
Example
Suppose a borrower takes out a loan of $200,000 with a 4% interest rate and a 30-year term. Let’s say the monthly payment is calculated to be approximately $955.
If the borrower has made payments for 5 years, they will have made 60 payments. At this point, the outstanding balance might be around $180,000 (this value depends on the exact interest calculation and the specific payment structure).
Ultimately, tracking the outstanding balance on a business loan is essential for managing cash effectively and planning for future payments.
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