Banking Glossary 2.pptx

Types of Interest Interest is the cost of borrowing money Here are some common types of interest: 1. Fixed interest type 2. Variable interest type 3. Annual Percentage Rate 4. Prime interest type 5. Discounted interest type 6. Simple interest type 7. Compound interest type 8. Public interest 1. F...

Types of Interest Interest is the cost of borrowing money Here are some common types of interest: 1. Fixed interest type 2. Variable interest type 3. Annual Percentage Rate 4. Prime interest type 5. Discounted interest type 6. Simple interest type 7. Compound interest type 8. Public interest 1. Fixed interest type A fixed interest type remains the same throughout the fixed rate term, often 2-5 years. 2. Variable interest type Whereas the prior type of interest is a set rate, so you know exactly what you’re paying, a variable interest type, as the name suggests, changes over time. 3. Annual Percentage Rate An annual percentage rate (or APR) is the total cost of a loan, including both the interest rate and any other associated fees. This is usually displayed as a percentage and will be charged annually. 4. Prime interest type This is the rate of interest set by banks for their best customers. Typically, it would be the rate at which a commercial bank would charge to their most financially strong customers, such as large, profitable corporations. 5. Discounted interest type A discounted interest rate is lower than the a lenders standard variable rate, and it’s what a bank will offer its customers for a specific period of time as a promotional deal. This can be used as an incentive to encourage customers to borrow money or take out a loan with the bank. 6. Simple interest type Simple interest is a type of interest that’s only charged on the principal or the initial amount of money borrowed. It’s not compounded, which means that interest is not charged on interest that has already been applied to the loan.Simple interest is often used for short-term loans, such as a personal loan or car loan as well as mortgages. 7. Compound interest type Compound interest is a type of interest that’s charged on the principal amount, as well as any accumulated interest. This means that the interest is added to the principal amount and then charged again. 8. Public interest Public interest is the welfare of the general public and society and while it isn’t a type of financial interest, public interest does impact the financial position of the public. Financial markets act in the public interest and is at the forefront of decisions made by governments, regulators and institutions. Types of commission commissions are fees charged for specific services or transactions provided to customers. The types of commissions: ●Straight commission ●Salary plus Commission ●Salary plus Bonus Commission ●Graduated Commission ●Override Commission ● Straight commission – a type of commission in which the agent or salesman's earnings is based on commission alone. It is usually ‘one’ percent. ● Salary plus Commission – a type of commission in which the agent’s earnings is based on a basic or fixed salary plus a commission. ● Salary plus Bonus Commission – a type of commission in which the sales agent receives a monthly plus a commission and/or bonus for exceeding a certain sales quota. ● Graduated Commission – a type of commission in which the total earning of the sales agent is based on commission rates for different levels of sales. ● Override Commission – an additional commission paid to a sales supervisor or head of department based on store sales or the sales of the representatives who work under the supervisor.