Is Balloon Payment a better option?

 


  

Chris Nyalungu, South Africa

I am planning to buy a car and the installment is reasonable but I noticed that they say I will pay Ballo0n Payment on the final year which seems too high and looks like I need to save extra cash towards that every month while paying installment.  Should I go for it or not?

Posted: July 23 2013


  NDBS Answer:

 

A balloon payment mortgage is a mortgage which does not fully amortize over the term of the note, thus leaving a balance due at maturity.  The final payment is called a balloon payment because of its large size.   A balloon payment mortgage may have a fixed or a floating interest rate. What you need to ask yourself before going that route is: Where will the money to settle the debt come from in the final year of paying that debt because the financier will expect you to settle the full outstanding amount.  Best option is to buy something that is amortized over the number of years and pay monthly installment that you can afford than paying based on assumptions that your financial situation will have changed for better at the end of the loan term.  

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  What does Parity Price mean and Where can one use it?

 

NDBS Reader

Posted: July  24 2013

  NDBS Answer:

 

Parity price is used in the context of convertible securities. It is the price an investor effectively pays to exchange or convert a convertible security into common stock and is equal to the price of the convertible security divided by the conversion ratio.


In agriculture, parity price is the purchasing power of a particular commodity relative to a farmer's expenses such as wages, interest on debt, equipment, taxes etc. If the parity price for a commodity is not sufficient enough for a farm operator to support his or her family and operate the business then the government could step in and support prices through direct purchases, or the issuance of non-recourse loans to farmers.

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  What does it mean by Company missing earnings?

 

NDBS Reader

Of late I have been following economic news and have noticed that most company results are said to have missed earnings.  What does that mean?

Posted: July 22 2013


  NDBS Answer:

This is when a company reports earnings and their final numbers end up falling short of the consensus analyst estimate, then they have missed their earnings number. This will usually result in weakness in the stock and analyst downgrades.  The opposite of "missed earnings" is "Beating the number." 

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  What is Dirigiste?

 

NDBS Reader

Posted: July  19 2013

  NDBS Answer:

This is an economic system where the state has more influence over investment, this is opposed to free market economy.  

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  What Is The Meaning Of Trade Surplus In The Country's Economy?

NDBS Reader

Posted: May 29 2013

  NDBS Answer:

It is where the economy of the country is at positive trade balance, the exports exceeds the import  whereby it translate to net inflow of domestic currency from foreign markets. 

 

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  What Does CAPEX Mean?

NDBS Reader

Posted: May 24 2013

  NDBS Answer:

Capex simply means Capital Expenditure.  It is when the company use the company funds to expand business by buying machinery for operational purpose or upgrade infrastructures that will enhance productivity.  

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  What Is Value In-Kind?

Alex Matlotlo, South Africa

I was going through sponsorship proposal of one company then came accross the Value In-Kind.  Please help me understand it.

Posted: May 18 2013


  NDBS Answer:

Value-in-kind (VIK) is a type of sponsorship where the sponsor to a project may bring goods or service than cash contribution and that which is bought will be given monetary value as contribution.  Sponsors use this kind of sponsorship to save as they are able to source goods at the lesser price yet still give the product the value that was required.  

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  What Is A Clear Definition of Business Rescue Plan?

NDBS Reader

Posted: May 09 2013


  NDBS Answer:

Business Rescue Plan is the process whereby a company is placed under supervision once the Board of Directors passes resolution and there must be proof that the company is under financial stress.  During this process the creditors cannot take the company to court or apply for company liquidation.  It is during this process that the Business Rescue Practitioner can come with turn-around strategy or look for investors who will guarantee payments to creditors or guarantee sustainability and profitability of the company.

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