Terms Glossary
Last updated May 8, 2025
1. Interest
- Definition: Interest refers to the cost of borrowing money, calculated on the outstanding principal balance. In Hypercore, this specifically refers to regular cash interest that is usually paid periodically.
- Alternative Names: Cash Interest, Simple Interest, Serviced Interest
- Key Features: Calculated on principal balance, may also apply to outstanding compounding balance
2. PIK/Compounding Interest
- Definition: Interest that, instead of being paid in cash, is added to the loan balance and begins accruing interest itself.
- Alternative Names: Payment in Kind (PIK), Capitalized Interest, Rollover Interest
- Key Features: Increases loan balance over time, stored separately in Hypercore's Outstanding Compounding Interest Balance
3. Flat vs. Floating Rate
- Definition: Describes how interest rates are determined throughout the loan term. Flat rates remain constant, while floating rates vary based on market indices.
- Components: Floating rates consist of Base Rate (market index) plus Margin (lender's premium)
- Common Indices: SOFR, Prime Rate, EURIBOR
4. Effective Date vs. Transaction Date
- Definition: Two distinct dates that track when financial events occur and when they impact calculations.
- Effective Date: When an event impacts interest calculations and reporting
- Transaction Date: When the event actually occurred in real-world terms
5. Interest Deposit
- Definition: A portion of the loan amount set aside specifically to cover future interest payments.
- Alternative Names: Retained Interest, Interest Reserve, Advanced Interest
- Function: Automatically covers interest payments until depleted
6. Disbursement
- Definition: The process of releasing loan funds to the borrower, marking the beginning of interest accrual.
- Alternative Names: Drawdown, Advance, Fund Release
- Features: Can be single or multiple, may include retained amounts for fees or interest reserves
7. OID/EIR
- Definition: Methods of calculating the true cost of borrowing and loan discounts.
- EIR: Effective Interest Rate - reflects total borrowing cost including fees and interest
8. Advanced Payment vs. Payment in Arrears
- Definition: Timing options for loan payments relative to the period they cover.
- Advanced Payment: Made before the covered period begins
- Payment in Arrears: Made after the covered period ends
9. Penalties and Fees
- Definition: Additional charges that may apply to the loan.
- Penalties: Charges for non-compliance or late payments
- Fees: Standard service charges for loan administration
- Treatment: Often have different repayment priorities
10. Early Redemption
- Definition: The process of fully repaying a loan before its scheduled maturity date.
- Key Aspects: Includes calculation of all outstanding amounts
- Features: May involve early payment penalties
This feature should only be for full redemptions. If the payout is only partial, please use the repayment action.
11. Write-Off
- Definition: The process of removing unpaid loan balances from financial records.
- Types: Can be partial or complete write-offs
- Impact: Affects financial reporting and loan portfolio management
12. Waiver
- Definition: The formal process of forgiving certain loan amounts or requirements.
- Applications: Can apply to principal, interest, fees, or penalties
- Implementation: May be manual or automated based on conditions
13. Equal Installments vs. Equal Principal
- Definition: Different approaches to structuring loan repayments.
- Equal Installments: Fixed total payment amount with varying principal/interest split
- Equal Principal: Fixed principal amount with decreasing total payments
14. Frequency
- Definition: The timing intervals for various loan events and calculations.
- Applications: Applies to payments, interest calculations, and fee assessments
- Common Options: Monthly, quarterly, semi-annual, annual
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