Par Loan

Par Loan. IntroductionPortfolio at Risk FormulaPortfolio at Risk ExamplePortfolio at Risk AnalysisSummaryPortfolio at risk or PAR is the type of ratio that usually is used in microfinance institutions or banks to measure the quality of loans and the risk that they currently have PAR is important when we need to analyze or measure the risk in percentage that our loans may go default if we properly breakdown the loans and group them in similar risk categories Portfolio at risk is usually calculated by using the amount of loan outstanding that is overdue comparing to total loan However sometimes the number of loan client is also used to calculate this ratio We can calculate portfolio at risk or PAR with the formula of using the amount of loan portfolio that is overdue from a certain period onward eg 30 days to divide with the total loan portfolio Sometimes we may need to calculate PAR 30 using clients in the portfolio at risk formula In this case we need to change our formula from “loan portfolio” to “loan client” ***We may also need to calculate PAR 60 days or 90 days In this case we need to change the above formula from 30 days to 60 days or 90 days For example ABC Ltd which is a microfinance institution has USD 9013400 of the total amount of loan portfolio and a detailed loan by overdue days as in the table below Calculate PAR 30 days PAR 60 days and PAR 90 days for the above loan portfolio Solution With the information in the portfolio at risk example above we can calculate PAR 30 PAR 60 and PAR 90 as below PAR 30 Loan portfolio at risk with 30 days overdue or more = 100950 + 82022 + 73009 + 55880 + 27020 = 338882 PAR 30 = 338882/9013400 = 376% PAR 60 Loan portfolio at risk with 60 days overdue or more = 82022 + 73009 + 55880 + 27020 = 237931 PAR 60 = 237931/9013400 = 264% PAR 90 Loan portfolio at risk with 90 days overdue or more = 73009 + 55880 + 27020 = 155909 PAR 90 = 155909/9013400 = 173% The excel calculation of portfolio at risk as well as the form and data in the picture of portfolio at risk example above can be found in the link here Portfolio at risk calculation excel In the portfolio at risk analysis we mainly use PAR to measure how much risk that our loan portfolio has in percentage compared to our total portfolio The term risk in this ratio refers to the risk that the loan’s clients may not pay or not be able to pay back the loans that we provided them To make it easy in analysis portfolio at risk is usually measured by using PAR 30 days in which “30” refers to the loan portfolio that is overdue 30 days or more However we may also use PAR 60 days or PAR 90 days to have a better picture of the quality of loans we have This is why when we calculate PAR there’s always the number of days behind the word “PAR” eg PAR 30 PAR 60 or PAR 90 Additionally we may also breakdown down the loan by location size product type or sector in order to have a detailed analysis of the loan quality when calculating PAR ratio Together with the trend analysis by comparing PAR ratios from one period to another we can measure the risk that the loans hav In general we can estimate how much in percentage our loan will default when we have sufficient information to calculate portfolio at risk in detail eg by breaking down loans into the small segments Hence the PAR ratio can help us to make the decision on future loan disbursement especially decisions on pricing to reflex the risk that the future loan disbursement may expose to Of course much more information and analysis such as 5Cs analysis will probably be required before we can provide a loan to the client However portfolio at risk can at least give us a rough idea of how much risk we will have in a specific location size product type or sector if we use it properly.

What Does a Par Loan Mean? By Jeannine Mancini A loan with a par rate often referred to as the base rate is an interest rate at which a mortgage lender won&#39t pay a yield spread premium require discount points for a mortgage or pay lender compensation.

Allocated Par Loan Value Definition Law Insider

Simply put the par rate is the difference of the adjustments to fee of 50% and the price of 50 which equals zero or par Now if your loan had no pricing adjustments your par rate would be 6% but if you wanted the lower rate of 575% you would have to pay 50% in discount points.

What Is the Par Rate for a Mortgage? An Interest Rate That

Administrative Agent shall determine the Par Loan Value of each Future Property when such Future Property becomes a Property hereunder in Administrative Agent’s reasonable discretion.