What Are Common Payment Term Options for a Loan

A credit being provided by a seller to a buyer is commonly being practiced by businesses. A credit offered by a business are number of days that the seller gives the buyer as an allowance to pay the goods being purchased.

These goods that are being sold are allowed for transfer to the buyer’s hands despite of payment to be received by the seller coming in on a future date. To discuss this, we will need to understand the types of payment terms of payday loans as this encompasses the relationship that exists between the buyer and the seller.

Common payment terms that seller allow are as follows:

  • Cash – Image result for loan payment termscash terms are often used by the seller if the relationship between buyer and seller is new. This restricts the buyer from getting the goods on hand prior to seller receiving the payment for the goods. This protects the seller losing products that are left unpaid especially in cases where seller is unaware of the buyer’s capacity to pay.
  • Net Credit Period – This is the next most common type of payment term option that companies and small businesses offer. These net credit period are specific periods that a seller is granting a buyer. It allows the buyer enough time to either prepare the sum of money for payment or make sure that the quality of the goods live to its claim.
  • Recurring Period –recurring period terms are most commonly associated with subscription payment or payment for goods that is under installment basis. This type of payments is often identified at a certain day of the month where the payments will occur. An example is payment of your utility bills that can occur during the 10th of every month during the subscription. It can also be done beyond a monthly period which can be quarterly, semi-annual or annually.Image result for loan payment terms Recurring Period
  • End of Month Term – this type of payment term can be referred to and be related to the recurring period term though not completely identical. If the payment is recurring, it can occur every end of the month during the subscription or credit period. But for cases where there is only a one-time payment, this type of payment may be specific to be completed by the buyer on or before the end of the month arrives.

What Are Mortgages?

Mortgage loans are loans made by borrowers to purchase real properties. This type of loan allows lender to put a lien on the property being purchased. With this concept, a mortgage is a secured type of loan against the borrower’s real property that has been purchased. The lender is then given the authority to demand claim over the property and sell it to pay off the loan in case the borrower fails to pay. A lender for this instance is usually a financial institution such as a bank or a government financial institution.

Mortgage loans can be made by the directly by a borrower to the financial institution or through an intermediary like the contractor or a broker. Most home purchases are funded by a mortgage loan as few individual have enough liquid cash to purchase a property. In some cases, businessmen prefer to purchase property through a mortgage and placing their liquid cash in other interest bearing investments which may yield a higher amount compared to the interest rates paid off from the mortgage.

Related imageA mortgage loan is paid by regular payments that can be made by the borrower on a monthly, quarterly, semi-annually or annual basis for a specified number of years as agreed with the financial institution granting the loan. These regular payments are called amortizations which include the principal, interest and other mortgage related fees (ie. Late payment fees). An amortization schedule is provided to the borrower which is prepared by the lender. It is based on remaining principal left at the end of each billing cycle, multiplied by the interest rate less previous amortization paid.

In relation to mortgage loans, a mortgage insurance may be put in place which is there to protect the lender from default payment. The mortgage insurance is usually part of the fees paid by the borrower as a component to the amortization paid. In the event where a property is foreclosed due to default payments made by the borrower, the lender may sell of the property to recover the amount that was borrowed. In most cases, the property is sold at a very low price to recover the amount soon as possible where the proceeds of the insurance act as a supplement to the sale of the property.