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Remaining balance is a money term you need to understand. Here’s what it means.
What is a remaining balance?
The remaining balance refers to the unpaid portion of a loan, debt or credit card.
Both the debtor and the creditor of a loan or payment plan should keep track of the remaining balance. As a debtor, you need to maintain an accurate record of the remaining balances of all your debts.
This helps ensure that you pay the remaining balance according to the payment plan so that you can minimize late fees. You also have to ensure that your budget can accommodate the debt payment.
If you don’t pay the remaining balance before the due date, it carries over to the next month. The next month, you’ll owe the remaining balance in addition to any applicable fees and interest for not paying the balance as agreed.
Knowing the remaining balances for your loans also gives an accurate picture of your total financial situation. By logging the remaining balances for your loans, you can keep track of the progress you’re making toward reducing your debt.
Creditors have to know the terms of each customer’s payment plan, when payments were received and the amount that customers have paid toward their remaining balances.
Some companies offer a discount to customers who pay their invoices before the due date; the company has to keep track of payments to ensure it issues the appropriate discounts.
Remaining balance example
If you take out a loan or participate in a payment plan, you’ll need to keep track of your remaining balance to forecast your future cash needs.
For example, assume that you charge $1,000 to a credit card. You decide that you want to pay the $1,000 charge off in six months. After making a payment of $200, you have a remaining balance of $800. You’ll have to adjust your budget to make sure you can pay the remaining balance off within six months.
If your credit card balances are overwhelming, see how a debt consolidation loan can help you reduce your debt.
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