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LSDefine

Simple English definitions for legal terms

compensating balance

Read a random definition: reasons for allowance

A quick definition of compensating balance:

A compensating balance is a certain amount of money that someone who borrows money from a bank has to keep in their account as a condition for getting the loan or line of credit. It's like a deposit that the bank requires to make sure the borrower can pay back the loan.

A more thorough explanation:

A compensating balance is the minimum amount of money that a borrower must keep on deposit with a bank as a condition for a loan or a line of credit. This balance is usually a percentage of the loan amount and is held in a non-interest-bearing account.

Let's say a business wants to borrow $100,000 from a bank. The bank may require the business to maintain a compensating balance of 10%, or $10,000, in a non-interest-bearing account for the duration of the loan. This means that the business can only use $90,000 of the loan proceeds and must keep $10,000 on deposit with the bank.

Another example is a personal line of credit. If a person wants to open a line of credit with a bank, the bank may require them to maintain a compensating balance of 5% of the credit limit. For instance, if the credit limit is $10,000, the person must keep $500 on deposit with the bank.

These examples illustrate how a compensating balance works. It is a way for banks to ensure that borrowers have a vested interest in repaying their loans and to offset the risk of lending money.

compensated surety | compensatio

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@bunnynoise: he did in fact cum
12:12
@info-man: I made my family listen to that one. huge hit in the bunnynoise household
was supposed to go to sneaky last night but her roommate cock blocked
12:17
bro don’t u have a wife on here
12:17
if my ehusband was saying shit like this our marriage would be on the rocks
i honestly wasn’t sure if she was still my wife or not 🤷🏽‍♂️
but assuming she is, then yeah
CynicalCynicalCynical
12:22
@bunnynoise: hey
CynicalCynicalCynical
12:22
i would never
12:23
@CynicalCynicalCynical: hi
i apologize i had to complain ab things going on irl for a sec
CynicalCynicalCynical
12:26
what is irl
CynicalCynicalCynical
12:26
i have never been outside
12:26
it means when you do things that aren’t on the screen i think
irl=in real life
12:27
@CynicalCynicalCynical: you’re so pale and vampiric
12:28
i am apparently 0.08 below cornell's admissions index
CynicalCynicalCynical
12:28
@CurvyHypnoticSheepdog: what is real life
@CynicalCynicalCynical: what you make of it
CynicalCynicalCynical
12:30
@info-man: whats the median?
12:31
3.48075
12:32
i think we should all go to cornell together probably
CynicalCynicalCynical
12:32
hmmm im .2 under
GreyCeaselessMammoth
12:33
wait how do u use the index i never understood it
GreyCeaselessMammoth
12:33
is there a calculator?
12:33
don't think so
12:33
i just put the numbers in a spreadsheet
cornell hit me with that r already
GreyCeaselessMammoth
12:36
they put me out of my misery last month, i respect them for that
@GreyCeaselessMammoth: literally. sometimes an r wave will pass but it just feels like impending doom when i’m not part of it
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