The term periodic payment plan refers to an investment plan where an individual makes small payments over time in order to invest in mutual fund shares.
What is periodic payment in banking?
- An amortized loan operates in such a way that payments are scheduled periodically it usually applies to both principal and interest.
- This is due to the fact that as the amount of the loan outstanding gets to be repaid, the remaining principal balance would be decreased too and the interest that is associated will also be decreased too with time.
- The payment principal amount is going to be bigger while the interest would be smaller.
- An amortized loan payment starts off first paying what is the relevant interest expense for the period, after then the remainder of the payment reduces the principal. This is what makes the question false.
- The process of Amortization spreads out a loan into a series of fixed payments over time.
- The borrower essentially pays the both the loan's interest and it's principal in varying amounts per month but the total payment is the same.
- During the beginning of the loan repayment schedule, interest costs are known to be highest and only a small portion of the balance/principal is paid.
- The statement is therefore FALSE.
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