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No, there is no rule that loans or bonds at higher interest rates take priority over those at lower interest rates. In bankruptcy, secured debts take priority over unsecured debts. For corporations or governments in bankruptcy, the seniority of the debt also determines the order in which the debts are paid. In both cases, the interest rate is not a determining factor.
If you are asking about paying off consumer credit, it is true that it generally works out that paying off the higher interest rate loans (e.g., credit cards) first is the best strategy, simply because the interest on those can make it virtually impossible to make any headway on paying off the total personal debt. Again, that's not a rule, but the arithmetic usually works out that way.
What else can I help you with?
What is the definition of an amortized loan?
An amortized loan is just a basic loan where the principal and interest are paid on a monthly basis. Usually, the majority of the interest is paid first, then the principal.
What describes discount loans?
They require the interest to be paid first.
How is interest paid on debentures is shown in Financial statments?
interest paid for debentures is a/an
When does an individual have to issue a 1099 for interest paid?
An individual must issue a 1099 for interest paid if the amount of interest paid is 10 or more in a tax year.
Why are interest rates on a 2nd mortgage higher than on a primary mortgage?
A second mortgage is generally riskier for a lender because the second mortgage is subordinate to the primary loan. This means that if the loan defaults, the first mortgage is paid off first and the lender risks losing the money put up for the second mortgage. To cover the extra risk, there is a higher interest rate placed on the second mortage.
What is the definition of an amortized loan?
An amortized loan is just a basic loan where the principal and interest are paid on a monthly basis. Usually, the majority of the interest is paid first, then the principal.
What describes discount loans?
They require the interest to be paid first.
How frequently is interest paid on a bond?
Interest is usually paid semiannually.
How is interest paid on debentures is shown in Financial statments?
interest paid for debentures is a/an
What is the difference between dividends and interest expense?
Interest Expense is usually calculated by (Carrying Value of Liability*Yield Rate * Time). Carrying Value is the actual present value of the liability (including discounts earned, etc) Interest Expense is the money that actually goes out of the firm. Interest Paid is calculated by (Face Value of Liability*Interest Rate * Time). Interest Paid is the fair-value of dues from the firm, but is not the actual value of the liability. Interest Expense is the amount reflected in the books of the firm, and is usually higher than Interest Paid. This is because Interest Expense often includes the cost of discount amortization(this is necessary when the bond/other liability was gained at a discount. The amortization is worked into the formula above, and hence gives an amount higher than interest paid. This gives the total interest expensed by the Company.) Hope this helps. Cheers
What is true about loan terms?
A longer term equals a lower monthly payment and a higher dollar amount of interest paid.
What type of interest is interest paid on the amount of your original deposit plus on any interest that you have earned previously on the money in an account?
it is any interest after the first compounding there isn't a special name for it...
What is the best definition of compounding interest-?
Interest paid on interest previously received is the best definition of compounding interest.
When does an individual have to issue a 1099 for interest paid?
An individual must issue a 1099 for interest paid if the amount of interest paid is 10 or more in a tax year.
What is uncapitalised interest?
It is interest that is paid separately. For an investor, it is paid out to the investor and not rolled into the investment.
What is the fundamental difference between simple and compound interests?
Simple interest:Every time interest is paid, it's paid on the amount you originally put in.Compound interest:Every time interest is paid, it's paid on the amount you had after the last time interest was paid.So, part of the interest that's paid today is interest on all the interest that's ever been paid, ontop of the amount you originally put in.
Which debts should be paid off first?
For consumer debts, credit cards. Highest interest.
