DEFINITION of 'Paydown'

This occurs when the amount a company or government repays in debt exceeds the amount they currently borrow. A Paydown takes place when a company reissues unpaid debt for less than the initial issue. For example, if a company pays $8,000,000 in corporate bond maturities and issues $5,000,000 in new bonds then the company has $3,000,000 less in debt because it has paid down its debt.


Paydown is also when a mortgage borrower pays the principal and interest of a mortgage. In doing so, the borrower is paying down his or her debt. In general, Paydown also refers to repayment of any outstanding loan. It could mean paying down a car loan, credit card debt, school loan or any other type of debt.

  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  3. Paydown Factor

    The portion of cash subtracted each month from the principal ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Corporate Bond

    A debt security issued by a corporation and sold to investors. ...
  6. Buy Here Pay Here

    Used car dealers who also handle vehicle financing for the buyer, ...
Related Articles
  1. Retirement

    How To Invest When You're Deep In Debt

    Debt is one of the biggest obstacles that prevents people from investing - but it shouldn't be.
  2. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  4. Bonds & Fixed Income

    The Risks Of Mortgage-Backed Securities

    Find out how weighted average life guards against prepayment risk.
  5. Options & Futures

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  6. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  7. Home & Auto

    7 Mistakes to Avoid When Buying a Used Car

    Understand the benefits of buying a used car. Learn about seven mistakes to avoid before making a used car purchase.
  8. Home & Auto

    When Getting a Rent-to-Own Car Makes Sense

    If your credit is bad, rent-to-own may be a better way to purchase a car than taking out a subprime loan – or it may not be. Get out your calculator.
  9. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  10. Credit & Loans

    How Risky Are Long-Term Car Loans?

    A look under the hood of long-term car loans.
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  4. What are some examples of simple interest loans?

    Two good examples of simple interest loans are simple interest car loans and the interest owed on lines of credit such as ... Read Full Answer >>
  5. How can I use the correlation coefficient to predict returns in the stock market?

    Simple interest is most commonly seen in short-term loans, such as those from payday lenders or pawn shops. You might see ... Read Full Answer >>
  6. What is the difference between secured and unsecured debt?

    The difference between secured and unsecured debt is the presence or absence of collateral backing. Secured Debt For a debt ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!