Pay Down

Posted in Marketing and Strategy Terms, Total Reads: 744

Definition: Pay Down

The amount that the company currently borrows is repaid by the company or government. The unpaid debt is reissued for less than the initial issue by the company. When the principal and interest of a mortgage is paid by the mortgage borrower .Thus the borrower in other words is paying down his own debt. Repayment of any outstanding loan can also be stated as Pay down. Credit card debt, car loan, school loan etc. can also fall under pay down.

For example: If a company issues $8,000,000 in new bonds and pays $10,000,000 in corporate bond maturities, then it has $2,000,000 less in debt, as it has already paid down its debt. Promise to pay the balance in instalments and paying a part of the total price at the time of purchase. Substantial amount in interest payments over the span of lifetime of the loan can be saved by calculating the effects of paying down.

1. (APR) Annual percentage rate divided by 12 will give the monthly percentage rate. Thus calculate the monthly payment.

2. Find out the “Interest," "Value," , "Additional Principal “ and "Principal" from the initial loan data.

3. Loan value multiplied by the monthly interest rate will give the first payment interest. Subtract the interest amount from the monthly payment amount to calculate the first payment principal.

4. New loan value is calculated by subtracting additional principal and first payment principal from the initial amount.

5. Until the value of the loan reaches $0.00 repeat the interest and principal calculations resulting for each new loan value.


Hence, this concludes the definition of Pay Down along with its overview.


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