Harness Money

Average Outstanding Balance refers to the average amount of money owed or remaining unpaid on a debt over a specific period of time. It is commonly used in the context of loans or credit card balances.

To calculate the Average Outstanding Balance, you typically sum up the outstanding balance at the end of each day over a given period and divide it by the number of days in that period. This provides an average representation of the amount owed during that time.

For example, let’s say you have a loan with a balance of $10,000 at the beginning of the month. Over the course of the month, you make partial payments and incur new charges, resulting in varying daily balances. To calculate the Average Outstanding Balance for that month, you would add up the balances at the end of each day and divide by the total number of days in the month.

Average Outstanding Balance is a useful metric because it provides an indication of the typical debt level over a specific period. Lenders and credit card issuers often use this metric to assess creditworthiness, determine interest charges, and calculate monthly payment amounts. It can also be helpful for borrowers to understand their average debt burden and make informed financial decisions.