Definition of unpaid balance - What it is, Meaning and Concept

Balance is a concept that can be used to name the conclusion obtained from an analysis or the result of an account or A calculation: At the level of the accounting , the balance is called the difference between income (the credit ) and expenses (the debe).

Insolute , meanwhile, is a term that comes from the Latin insolūtus and which refers to what has not yet been paid .

The idea of ​​ outstanding balance , thus, appears when a certain type of loan or credit is requested.In this kind of operations , a person or entity asks for money from a bank, which delivers said money by charging interest .The one who requests the credit, therefore, contracts a debt with the bank that owes settle within a set period.

It can be said that when an individual contracts a credit, the amount that I request becomes the original debt .Each installment of the credit that the subject pays includes the return of capital plus the interest charged by the bank : so the original debt is reduced with each installment, and the corresponding interest is paid simultaneously (which is recalculated after each payment).

The outstanding balance , in short, is the amount that has not yet been paid from the original debt .If a person I request a Loan of 100,000 dollars and has returned 75,000 dollars , the outstanding balance is 25,000 dollars .

It is important to note that there are loans whose interests are estimated according to the amount currently owed and others that are based on the original debt.The calculation of the interests of the first must be made month by month, using the multiplication of the interest rate by the outstanding balance .

For this reason, the more we have paid off our original debt, the lower the amount of interest we will have to face.It is very important to know before hiring a loan if the institution that assigns it to us charges interest on the outstanding balance or in based on the amount requested, and then make the decision that suits us, according to our possibilities and the regularity with which we know that we will be able to pay the fees.

Some institutions give us the opportunity to advance payments whenever we have extra money, and this can only be beneficial , since it further decreases the interest we will pay in the future: if we have the money In order to settle two installments, for example, we will ignore the interest corresponding to the following one to arrive directly at an inevitably lower one.However, it is important to note that not all companies allow us to carry out ar operations of these characteristics , so we must always ask before.

If, in effect, the entity lender gives us the ability to pay more money than the one corresponding to a single installment, then it is also likely that we can pay off the rest of the debt in a I only pay .It is not very usual, but it is good to have this benefit, since in many contracts a penalty is foreseen for any balance advance.

In the policy of interests and commissions of each company hides the answer to "what type of loan is the most convenient", if the one that entails the payment of interests on the unpaid balance or that in which they are calculated on the initial debt.For example, to balance the benefits of the first type, late payments translate into high commissions and, consequently, an increase in interest; In a nutshell, we should only opt for this modality if we are sure we can meet the deadlines stipulated in the contract.