If one or more payments have been missed where regular payments are contractually required, such as mortgage or rent payments and utility or telephone bills, the account is in arrears. Payments that are made at the end of a period are also said to be in arrears. In this case, payment is expected to be made after a service is provided or completed—not before.
Not in certain contexts, such as in bond trading, when arrears is a reference to payments that are made at the end of a specified period. Mortgage interest payments are paid in arrears and only suggest a negative connotation when the due date has passed. This means that the interest is due to be paid on the maturity date of the loan, instead of in bits and pieces during the life of the loan like an annuity payment.
Understanding “With No Standing Arrear in Btech”
This achievement demonstrates a student’s ability to meet academic standards and successfully progress through their chosen course of study. The term is usually used arrears meaning in education in relation with periodically-recurring payments such as rent, bills, royalties (or other contractual payments), and child support. Arrears can also be applied to instances in the context of finance. An annuity such as a loan repayment is a series of equal amounts of payment that occurs at equal time intervals—say for $250 per month for 10 years. If the annuities are due at the end of the period such as mortgage payments, they are called an ordinary annuity or annuity in arrears. Being in arrears may or may not have a negative connotation depending on how the term is used.
Her relationship with her boyfriend has ended and her mortgage is in arrears. The average household in arrears owes more than £1,500 for electricity and £1,300 for gas. Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.
Types of Arrears in Finance
For example, a housing tenant who is obliged to pay rent at the end of each month is said to pay rent in arrear, while a tenant who has not paid rental due for 30 days is said to be one month in arrears. Precise usage may differ slightly (e.g. “in arrear” or “in arrears” for the same situation) in different countries. Arrearage also applies to dividends that are due but have not been paid to preferred shareholders. Because preferred shares have guaranteed dividends regardless of whether the company makes a profit or not, dividends are said to be in arrears if the company misses a cumulative dividend payment.
Why Do Companies Often Pay in Arrears?
- The term is usually used in relation with periodically-recurring payments such as rent, bills, royalties (or other contractual payments), and child support.
- Precise usage may differ slightly (e.g. “in arrear” or “in arrears” for the same situation) in different countries.
- Some of the most common types of payments to be in arrears include payroll, mortgage, rent, car payment, child support, credit card, and taxes.
When payrolls are in arrears, the previous week’s (or some other period’s) payments are processed and paid out to employees as opposed to wages earned during the current period. Current pay would instead occur as payroll and processed each period as it ends. Arrears is a financial and legal term that refers to the status of payments in relation to their due dates.
The dividends in arrears must be disclosed in the footnotes to the financial statement. The company is also restricted from making any dividend payouts to common shareholders until it settles its dividends payable account. When it comes to pursuing a Bachelor’s degree in Engineering (Btech), the term “standing arrear” refers to a failed subject or course that has not been cleared within a specific time frame. It is important to note that an arrear is different from a backlog, as an arrear refers specifically to subjects that have not been cleared within the stipulated time period.