Suggest a new Definition Proposed definitions will be considered for inclusion in the Economictimes. Debt Consolidation Definition: Debt consolidation means combining more than one debt obligation into a new loan with a favourable term structure such as lower interest rate structure, tenure, etc.
Here, the amount received from the new loan is used to pay off other debts. Description: Debt consolidation is used by consumers to pay off a small debt in one go by taking one big loan. By doing this they save on interest as well as the finance cost of the small loan owed by them. The borrower would now have to make one payment instead of making multiple payments to other creditors. Debt consolidation can happen on debts which are not tied up to an asset.
Education loan, amount owed on credit card, personal loan are some examples of unsecured loans which can come under debt consolidation. There are some steps which borrowers should follow when they are planning to consolidate their debt.
Identify your debt s obligations, the total amount that you owe the lenders, time period or tenure, apply for a consolidation loan, once you receive the loan pay off other debts, stick to the payment cycle of the consolidated loan.
Let's understand the concept with the help of an example. For instance you have a loan obligation of Rs 3,00,, which includes a two-year loan of Rs 1,00, with an interest rate of 12 per cent. There is another loan of Rs 2,00, which carries an interest rate of 10 per cent annually. The monthly payment for both the loans comes out to be around Rs which includes a payment of Rs from loan 1, and another payment of Rs from loan 2. The borrower can reach out to debt Consolidation Company to understand the structure.
They might be able to lower the easy monthly instalments or EMIs to around Rs , and consolidate both the loans into one. However, in the process the tenure was increased to pay off the loan.
Debt consolidation is used by consumers to pay off a small debt in one go by taking one big loan. Distributive Bargaining Definition: Distributive bargaining is a competitive bargaining strategy in which one party gains only if the other party loses something. Description: Distributive bargaining is also known as zero-sum negotiations because the assets or the resources which need to be distributed are fixed.
So, all the negotiations will have to happen by taking that into context. The ultimate aim, under distributive bargaining approach, is not to come to a win-win kind of situation but that one side wins as much they can. Both parties will try to get the maximum share from the asset or resource which needs to be distributed.
We end up using distributive bargaining approach in our daily lives as well when we shop. Usually distributive bargaining approach works well with products which do not have a fixed price. For example, if you go to the supermarket and buy some products, you won't be able to bargain because they have a fixed price.
Either you can buy the product or leave it. Let's understand distributive bargaining approach with the help of another example. You go to Lajpat Nagar market in New Delhi to buy a rug.
You are visiting the shop for the first time and if the rug is of adequate quality, both the parties might not see each other again.
The shopkeeper will quote you one price, rather than any lower rate as suggested by you. In distributive bargaining approach, both the parties try to know each other's walk-away-value to take a decision. After that, they make a deal in that it is closer to their own goal rather than adjusting according to the competitors.
In case the rug cost you Rs , and you give a counter offer of Rs Financing from these alternative sources have important implications on project's overall cost, cash flow, ultimate liability and claims to project incomes and assets. Debt refers to borrowed capital from banks and other financial institutions. It has fixed maturity and a fixed rate of interest is paid on the principal. Equity is provided by project sponsors, government, third party private investors, and internally generated cash.
Equity providers require a rate of return target, which is higher than the interest rate of debt financing. This is to compensate the higher risks taken by equity investors as they have junior claim to income and assets of the project. Lenders of debt capital have senior claim on income and assets of the project. Generally, debt finance makes up the major share of investment needs usually about 70 to 90 per cent in PPP projects. The common forms of debt are:. Commercial loans are funds lent by commercial banks and other financial institutions and are usually the main source of debt financing.
Bridge financing is a short-term financing arrangement e. Bonds are long-term interest bearing debt instruments purchased either through the capital markets or through private placement which means direct sale to the purchaser, generally an institutional investor - see below.
Subordinate loans are similar to commercial loans but they are secondary or subordinate to commercial loans in their claim on income and assets of the project. The other sources of project finance include grants from various sources, supplier's credit, etc. There is also a risk of not raising the funds you need due to poor market conditions.
In general, the government doesn't provide finance for starting up or buying a business. However, you may be suitable for a grant to:. Crowdfunding is way to raise money by asking a large number of people each to invest in or donate to your product idea or project.
It usually done through the internet. There are four main types of crowdfunding you can use to get finance for your business. Each uses a different way to attract funding and may have different tax responsibilities for the parties involved. In donation-based crowdfunding, a contributor makes a payment to your business without receiving anything in return.
This is generally used to raise money for one-off projects. In reward-based crowdfunding, you give the contributor a reward, such as goods or services or a discount , in return for their payment. Equity-based crowdfunding also called crowd-sourced funding is a way for small to medium-sized companies to raise money for their business.
This is where a contributor lends money to your business and you agree to pay interest and repay principal on the loan. Before you start a crowdfunding campaign you should understand your tax responsibilities. Have a look at which finance options are available depending on your reason for seeking finance. We acknowledge the traditional owners of the country throughout Australia and their continuing connection to land, sea and community.
We pay our respect to them and their cultures and to the elders past and present. Toggle navigation. Sources of finance debt vs equity. Sources of finance: debt vs. On this page you'll find some common sources of debt and equity finance.
On this page Difference between debt and equity finance Sources of debt finance Sources of equity finance Guide to business funding. The difference between debt and equity finance. Two of the main types of finance available are: Debt finance — money provided by an external lender, such as a bank, building society or credit union.
Equity finance — money sourced from within your business. Check out our handy list of financial terms. Sources of debt finance. Financial institutions Banks, building societies and credit unions offer a range of finance products — both short and long-term. These include: business loans lines of credit overdraft services invoice financing equipment leases asset financing.
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