Glossary

Acceptance Letter

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.

ADR

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.

Amortisation

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.

Annuity

A series of payments of a fixed sum at regular intervals.

Borrower category

Defining the status of a borrower as salaried or self-employed.

Close relatives

As per section 6 of the Companies Act, a close relative acceptable as guarantor is any of the following: Father, mother (including step mother), son (including step son), son's wife, daughter (including step daughter), son's son, son's son's wife, son's daughter, son's daughter's husband, daughter's husband, daughter's son, daughter's son's wife, daughter's daughter, daughter's daughter's husband, brother (including step brother), brother's wife, sister (including step sister), wife/husband and sister's husband. However for consideration of these relatives as guarantors for the loan they should comply with the age and other norms of the company.

Down payment

Money paid up front to make up the difference between the purchase price and loan amount.

Estimation

Estimating the value of the asset, especially if the asset is property that is not newly developed. Same as Valuation.

Fixed installment

Payment of fixed installments over the tenure of the loan.

IRR

Internal Rate of Return or the IRR is a measure of cost of capital and the earnings from the cash flows to be made on the loan disbursed.