A remaining balance is a financial term that can be either a positive or a negative number, depending on the account in question. When referencing a mortgage, student loan, or other debt, a remaining balance — also known as the outstanding balance — refers to what you still owe until your remaining balance is equal to zero. The remaining balance on your bank accounts, such as your checking or savings account, describes the money you have at hand to spend. This amount is also known as your available balance.
At first, the concept of a remaining balance may seem very straightforward — it’s just the amount you owe, right? Like if you borrowed $100 from your dad and you’ve paid him back $75 already, then your remaining balance is $25. Seems simple enough.
However, when we start looking into our finances, the term becomes a little murkier. For example, a loan from your father probably doesn’t come with an interest rate, penalty fees, and other complications (or let’s hope not!). Unfortunately, other loans will have these fees, so the remaining balances on other accounts can be a little trickier to figure out.
Today we’ll take a closer look at what a remaining balance means both positively and negatively on your personal balance sheet. But first, let’s do a quick analysis of assets and liabilities for some context.
Assets vs. liabilities
Your assets are things you own that have value, like your car, house, and other valuables. Liabilities are what you owe, such as credit card balances, mortgages, or student loan debt. Oftentimes, something you own can be both an asset and a liability.
A house is the perfect example of this. You own it, so it’s an asset, but you also probably have a mortgage, which is a liability. A car that’s already paid off, on the other hand, would be purely an asset.
Understanding the remaining balance on debts
Now that you have a grasp on your assets and liabilities, you can take a closer look at what your remaining or outstanding balances are. This way, you can start to gain a full understanding of exactly how much you owe, how long it might take you to pay it off, and how much this debt is costing you over time.
Basically, a remaining balance is the unpaid portion of your debt. For example, if you bought your home for $200,000 and you made an initial down payment of $40,000, your remaining balance is, simply put, $160,000. However, you need to keep in mind that you will be paying interest on that principal. This means the total amount you’ll end up paying is considerably more than $160,000. But this simple calculation does give you a starting point.
In addition to considering your interest rate, it’s also important to carefully budget for your monthly payments on all of your debts so as not to miss your due date. If you miss a due date, you’ll often incur late fees, which add to your outstanding balance and will cost you more over the life of the loan.
How can a remaining balance save you money?
Fortunately, you can use the remaining balance to calculate how much quicker you can pay off your debt if you were to make more than the minimum monthly payments. This is also a way to figure out how much you can save by paying down your debts more quickly.
Many creditors, for instance, will do the work for you. Take a look at your next credit card statement and there’s often a section that shows how much time and interest you can save just by paying a little extra every month.
Can your remaining balance be a negative and a positive?
The remaining balance on your credit card can mean two different things. In this case, a remaining balance can either refer to the amount owed from purchases and interest or to the amount left available to spend.
If you have a credit limit of $5,000 on your Visa, say, and you made transactions up to $2,000, you can look at that in one of two ways. The remaining balance you have to spend is $3,000, or the remaining balance you owe is $2,000.
Understanding a positive figure remaining balance
Since we often think of a remaining or outstanding balance as a debt to be paid, it’s easy to forget that remaining balances also refer to money you have on hand in your bank account. (Remember that a bank account is also considered an asset.)
However, keep in mind that calculating the remaining balance in your bank account may be a simple or complicated calculation depending on your circumstances.
- Simple. For instance, if you have a checking account that does not collect interest, your remaining balance will be equal to the difference between your original balance after accounting for all outstanding debits and credits.
- Complicated. If you do have an interest-bearing bank account, such as a money market or savings account, your remaining balance would be the money left over after any debts plus interest.
If you don’t yet have a savings account, you may want to consider one of the accounts below. Since each account is interest-bearing, you can gradually add to your remaining balance.
Don’t forget about fees
You might also need to allow for any applicable fees that your bank may charge, which can eat into your available balance. Ideally, you have a bank account with zero fees. If you don’t have an account with few or no fees, you may want to consider opening one of these checking accounts.
What is an average outstanding balance?
You can look at your average outstanding balance by individual accounts or by looking at your overall debt picture. But basically, average outstanding balances are the amount of money you owe averaged over a specified period of time, such as the number of days in a statement cycle.
For example, a credit card company will usually calculate your interest on a daily basis, which is known as your daily periodic rate. So to figure out your average daily balance, you would add up your balance for each day of a billing cycle and divide it by the number of days in that period of time.
What’s the best way to keep track of my outstanding balances?
There are a number of ways to stay abreast of your loans and other debts to help you keep track of your progress. You could do it the old-fashioned way with a notebook and pencil, make a spreadsheet on your computer, or (better yet) let someone else do it for you.
You could hire a credit counselor or financial planner, which may be a good idea if you’re uncertain about financial planning and you have a history of mishandling your accounts. However, there are also many great online credit service resources that offer free credit scores, reports, and insights about your financial picture. These reports will also have a list of your debts all in one place. Sure, they’re going to try to sell you things too, but the services are free and can be an invaluable asset.
- A remaining balance refers to either how much you owe or how much you have available to spend.
- Each time you make a payment on your loans, you are reducing the outstanding balance owed.
- In the simplest terms, to calculate your remaining balance, take the total amount owed and subtract how much you’ve already paid.
- It’s important to know the aggregate of all your outstanding balances to help you make better financial decisions and plan for your future.
View Article Sources
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- Legislation of Interest (Pending and Recent) — Officer of the Comptroller of the Currency
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