Borrowings Glossary

After you collect your sanction letter, you should, if you accept the terms of contract, communicate your willingness to accept the loan by way of an acceptance letter. You should do it within a particular time-frame which may vary between 1-3 months from the date of the sanction letter.

A method of accounting that allows revenues and expenses to be accrued, even if cash had not been received or paid during the accrual period.

The fee you pay for meeting the overheads of the administrative work handled by the housing finance firm. Usually to be paid while giving the acceptance letter.

An acronym for American Depository Receipt. Currently popular because of the rush of Indian firms to issue ADRs. Technically, it is an instrument traded at exchanges in the US representing a fixed number of shares of a foreign company that is traded in the foreign country. By trading in ADRs, U.S. investors manage to avoid some of the problems of dealing in foreign securities markets. The ADR route enables companies to raise funds in the U.S. financial markets, provided they meet the stringent regulatory norms for disclosure and accounting.

Number of equated installment(s) paid in advance at the time of disbursement in the form of post dated cheques.

The acceptance of an application subscribing to the shares of a company. Establishes a contract that underlies an investment through public subscription.

Reduction of an amount at regular intervals over a certain time period. Usually, refers to the reduction of debt by regular payment of loan installments during the life of a loan. Also describes the accounting process of writing off an intangible asset.

A method of calculating interest on the reduced principal at the end of every year. However as repayments for all loans are EMI, though the principal is reduced every month, the interest is calculated on the original loan amount for twelve months after which the repayments towards principal are taken into account. Basically, this method will benefit you the least.

A method of calculating EMI in which the appropriation towards interest and principal is made at the end of the financial year.