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What is Compound Interest?

Whenever a person takes out a loan, secures finance for a venture or refinances an asset, there is always a clause regarding the interest that the principal amount will accrue during the finance period. When the interest on the primary account is accrued and then added to the primary amount before the next interest is calculated, you are dealing with compound interest – In other words interest on interest. You are no longer working with just the primary amount and random interest. You’re dealing with an amount of money that is added to the primary fund and is then used as the basis of the next interest calculation.

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What Is a Balloon Payment?

Loans can be repaid in a number of different ways. The creditor might be expected to pay back the money in regular equal amounts over a certain amount of time until the debt is repaid. This is not the only way of doing things though. A balloon payment refers to a large lump sum that will be due at certain times during the repayment period. In a lot of instances this large payment will be made at the end of the loan.

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