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Debt consolidation means combining more than one debt Contingent liability 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. 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 Contingent liability 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 Contingent liability 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 Rsand consolidate both the loans into one. However, in the process the tenure was increased to pay off the loan.
A contingent liability is defined as a liability which may arise depending on the outcome of a specific event. It is a possible obligation which may or may not arise depending on how a future event unfolds.
A contingent liability is recorded when it can be estimated, else it should be disclosed. A contingent liability is a liability or a potential loss that may occur in the future depending on the outcome of a specific event.
Potential lawsuits, product warranties, and pending investigation are some examples of contingent liability. If the amount can be estimated, the company sets aside that amount separately to be paid out when the liability arises.
Contingent liability as a term does not apply only to companies, but to individuals as well. That amount could well become a contingent liability if your child fails to make monthly payments after getting a job. You might have to pay the amount because you have taken the loan from your bank.
Your company might be in the middle of a lawsuit and your lawyer thinks that the other party has a strong case which could potentially lead to damages worth Rs 10 crore. In that case, the company would book that amount as contingent liability on its balance sheet.
On the other hand, if the lawyer or the legal department thinks that the other party does not have a very strong case in hand. They would advise the firm not to make any provision of a contingent liability.
When the probability of a contingent liability is low then is no journal or even a disclosure is required in the books of accounts. Chattel mortgage is a loan extended to an individual or a company on a movable property.
Chattel mortgages are secured loans attached to a personal movable property which is used to extend the loan to an individual or a business owner. Usually, the rate of interest levied on such mortgages is lower.
Chattel mortgage generally carries a lower rate of interest, flexible payment structure, and thus proves to be better especially for business owners.
If you are a contractor involved in repairing job or construction then you would need a vehicle to carry the goods as well as construction material. It could be a tow truck or mini-van etc. The most important advantage to a mortgage company is that assets which are kept as security are movable and can be sold off quickly in an event of a default.
Automobiles, yacht or boats, mobile homes or trailers, electronic items, and appliances are all examples of movable property.Contingent liability is an important issue when it comes to FHA loan approval.
If you are considering an FHA home loan in the future, it’s good to think seriously about co-signing and whether or not being a co-signer on another person’s loan could interfere with your chances at loan approval.
Bank owner contingent liability has been important in the development of many industrial countries. Unlimited liability on bank owners was an important element in the success of Scottish banking, for example, and lasted until , when banks were allowed to adopt a limited liability designation.
Year Title; October Tax Credits Contingent Liabilities Report: March Tax Credits Contingent Liabilities Report: December Tax Credits Contingent Liabilities Report.
The objective of IAS 37 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to the financial statements to enable .
A contingent liability is a potential liability.
For example, if a parent guarantees a child’s car loan, the parent has a contingent liability. If the child makes the car payments and pays off the loan, the parent will have no liability.
Meaning of Contingent Liability: Contingent liabilities are such type of liabilities or a potential losses that may occur in some future period, depending on the outcome of a specific event.