The average term to maturity of the debt situation in the dashboard is the average velocity to repay a loan.
The average term to maturity is the duration required to repay half of the outstanding balance of a debt, taking into account the amortization:
Sum of (Amortized principal on year i * i) / Sum of amortized principals on year i
Example
|
Loan |
Outstanding Balance |
Average Term to Maturity (year) |
|---|---|---|
|
1 |
1 000 000 |
1,5 |
|
2 |
2 500 000 |
1,5 |
|
3 |
1 500 000 |
2,4 |
Average term to maturity
= Sum of (Amortized principal on year i * i) / Sum of amortized principals on year i
= (1 000 000 * 1,5 + 2 500 000 * 1.5 + 1 500 000 * 2.4) / (1 000 000 + 2 500 000 + 1 500 000)
= 1,77
-> 1 year and 9 months