Accounting

We answer your accounting questions.

Over 500 questions have been answered on our accounting blog. Click here to suggest a question.



December 3, 2007

What is the difference between loan interest and bank loan repayment?

I would describe loan interest to be the bank’s return on the money it has lent to a borrower. Interest is the amount the bank has earned and charges for the use of the money it has lent.

I would describe a bank loan repayment to be the return of the money that the bank has lent. In other words, I assume that a loan repayment refers to the principal payment (and not the total payment or the interest payment). Not everyone necessarily uses the terminology in the same way.

When a borrower makes a loan payment (as opposed to a loan repayment), it is likely that the bank will first collect the interest it is owed. Any remainder between the total payment and the interest payment will be applied to the loan’s principal balance.

AccountingCoach.com offers FREE explanations, drills, exams, crossword puzzles, and a dictionary of more than 1,000 accounting terms.




Comments

8 Responses to “What is the difference between loan interest and bank loan repayment?”

  1. shammas on January 3rd, 2008 6:59 am

    sir,
    pls send Define TDS &TDS rate

  2. Mohamed on April 7th, 2008 3:17 am

    How Can Ireconcile The A/c Payable

  3. shameer on July 8th, 2008 9:11 am

    How can i reconcile A/C Payable in proper excel can you illustrated with the excell file.
    another question is how can i treating the construction exp such as directing material&in direct materials.i need with example

  4. imtiaz on August 23rd, 2008 7:06 am

    What is sundry Dedtor?
    What is the entry for Outstanding Salaries?

  5. raju on January 14th, 2009 9:01 am

    define TDS

  6. BHOGENDRA ACHARYA on March 4th, 2009 12:50 am

    Sir,

  7. BHOGENDRA ACHARYA on March 4th, 2009 12:52 am

    Sir.Please tds rate or service taxof details

  8. may on June 15th, 2009 4:14 am

    What is a stock right or stock warrants? What’s the use of it? when can we recognize gain or loss on this warrants?
    Please cite an example.

Leave a Reply