NEGATIVE EQUITY Meaning and
Definition
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Negative equity refers to a financial situation wherein the value of an asset or investment, such as a property or vehicle, is lower than the outstanding balance of the loan or debt secured against it. In other words, it occurs when the amount owed on the asset exceeds its current market value.
Negative equity is commonly associated with situations where borrowers have taken substantial loans or mortgages to purchase assets, such as a house, and subsequently experienced a decline in the value of those assets in a volatile market. When the value of the asset decreases, it can lead to negative equity. This situation may arise due to various factors, such as economic downturns, a decline in property prices, or excessive borrowing.
Having negative equity can pose significant challenges for borrowers, as it restricts their options. For instance, if a homeowner with negative equity intends to sell a property, they may not be able to cover the outstanding loan amount with the proceeds from the sale, potentially resulting in a shortfall. Furthermore, negative equity can hamper the ability to refinance the loan or take out additional loans against the asset.
Overall, negative equity represents a precarious financial situation where the value of an asset drops below the outstanding debt or loan, necessitating careful financial planning and management to overcome the challenges it poses.
Common Misspellings for NEGATIVE EQUITY
- begative equity
- megative equity
- jegative equity
- hegative equity
- nwgative equity
- nsgative equity
- ndgative equity
- nrgative equity
- n4gative equity
- n3gative equity
- nefative equity
- nevative equity
- nebative equity
- nehative equity
- neyative equity
- netative equity
- negztive equity
- negstive equity
- negwtive equity
- negqtive equity
Etymology of NEGATIVE EQUITY
The term "negative equity" is composed of two words: "negative" and "equity".
The word "negative" comes from the Latin word "negativus", which means "denied" or "opposite". It is derived from the verb "negare", meaning "to deny" or "to say no".
The word "equity" traces its roots back to the Latin word "aequitas", which means "fairness" or "equality". It is derived from the adjective "aequus", meaning "level" or "equal".
When combined, "negative equity" refers to a situation where the value of an asset (such as a property or an investment) is lower than the outstanding amount of a loan secured against it.
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