Self liquidating loan define

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The borrowed money is used to acquire resources that are combined for later sale, and the proceeds from the sale are used to repay the loan.Most short-term unsecured loans are self-liquidating. This kind of loan is recommended for companies with xcellent credit ratings for financing projects that have quick cash flows.seasonal loan that is used to pay for a temporary increase in accounts receivable or inventory.

Next month, since you owe less money,you pay less interest, which means more of your money goes to the principal.Although few loans are legally named "self-liquidating," the term is commonly used by bankers to refer to lending arrangements that work in this manner.It is also used by some scam artists, as we explain below.This process continues through the life of the mortgage until you finally make a last payment that contains almost no interest and completely pays off your balance.Mortgages were originally interest-only loans that needed to be refinanced every five or so years.

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