Pro rata
Asset-Backed Securities glossary · Cash Flow Waterfalls & Triggers
Definition
In principal allocation, division proportional to outstanding balances; contrasted with sequential pay.
Pro rata in plain English
Pro rata just means 'shared in proportion to how much each person is owed.' If a deal pays back principal pro rata, and one group of investors holds twice the balance of another, they get twice the payment — everyone shrinks at the same rate, side by side. This is the opposite of sequential pay, where one group must be fully paid off before the next group gets any principal at all. Think of splitting a refund among roommates by how much each chipped in, versus paying back one roommate completely before touching the next.
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