General Rent-All's officers arrange a $50,000 loan. The company is required to maintain a minimum checking account balance of 10% of the outstanding loan. This practice is called

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The practice of maintaining a minimum checking account balance as a requirement of a loan is called a compensating balance. This helps ensure that the lender will have access to some funds in case the borrower defaults on the loan. This is different from an installment loan, which is repaid in fixed installments over a period of time, a discounted loan, which has a lower interest rate than the normal rate, and a balloon payment, which is a large final payment due at the end of a loan term.

General Rent-All's Officers Arrange a $50,000 Loan