Accelerated Payments

AAA

DEFINITION of 'Accelerated Payments'

A term associated with making additional unscheduled payments on a loan at predetermined, or random intervals. Making additional unscheduled payments reduces the principal balance of the loan, meaning that more principal and less interest is paid off in subsequent payments. Making accelerated payments will lead to the early pay-off of a loan.

INVESTOPEDIA EXPLAINS 'Accelerated Payments'

Most loans have an amortization schedule that defines how much principal and interest will be paid with each scheduled payment, so that the loan will be paid-off at the end of an established term.

Also, the amount of interest paid with each payment is a function of the remaining principal balance of the loan at that time. The higher the rate of interest on a loan, the more beneficial it can be to make accelerated payments. The faster the borrower applies accelerated payments toward the principal balance of a loan, the more interest that is saved.

RELATED TERMS
  1. Accelerated Option

    This term refers to an option in an insurance contract, usually ...
  2. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  3. Creditor

    An entity (person or institution) that extends credit by giving ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Non-Recourse Debt

    A type of loan that is secured by collateral, which is usually ...
  6. Loan Stock

    Common or preferred stock shares that are used as collateral ...
Related Articles
  1. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  2. When (And When Not) To Refinance Your ...
    Home & Auto

    When (And When Not) To Refinance Your ...

  3. Student Loan Debt: Is Consolidation ...
    Retirement

    Student Loan Debt: Is Consolidation ...

  4. Understanding The Mortgage Payment Structure
    Credit & Loans

    Understanding The Mortgage Payment Structure

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center