GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Interest-Crediting Methods


Synonyms:crediting method, determining accrued interest, method of crediting interest
Filed Under: financial-banking, insurance, investments
Tags: banking, credit, insurance, investment
 

Definition of interest-crediting methods

interest-crediting methods
1. The method used to determine how interest is accrued, owed, and eventually dispersed to investors or the party due. Insurers use in excess of 35 interest-crediting methods including, but not limited to, point-to-point, yield spread, annual reset, averaging, or high water mark.

Related Terms and Acronyms:

  • accrue   To gather together an amount often over a period of time.
  • accrued interest   Interest which has already been earned but has not yet been paid.
  • annual percentage rate (APR)   A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.
      ➥  A number used to compare costs associated with mortgage loans and other forms of financing.
  • credit card (CC)   A plastic card with a coded magnetic stripe that, when signed, entitles its bearer to a revolving line of credit, with a credit limit and interest rate determined by the borrower's income and credit report.
      ➥  A payment card that gives customers access to a revolving line of credit.
  • debt   Money one person or firm owes to another person or firm.
  • interest factor   The decimal equivalent for an interest rate on a unit amount for a period of time. Computed by interest rate divided by number of days in a basic year times the number of days accrued.
  • interest rate (IR)   The rate a lender charges an individual to borrow money.
  • line of credit (LOC)   A commitment by a financial institution to lend up to a specified maximum amount to a customer during a specified period of time.
  • loan   Letting another party use something of value temporarily.
  • mortgage (mtg)   A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.

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