Quick Facts For Different Finance Products
Personal finance is a fact of life. Everyone has to handle their credit, loans and insurance on some level, even if they do not work in finance. Everyone should have a basic understanding of a few fundamental different finance products and their purposes.
If a person is purchasing a house, they will almost always need to obtain a mortgage loan to pay for it. These loans are made by a number of business, but mainly by banks and specialized mortgage companies. These are basically large loans that use the house as the security. A mortgage is generally for a period of thirty years, but some people get fifteen or even ten year terms. Also, there are a number of different rates a person can end up with depending on the structure of the loan.
Today, most people will get a fixed rate of interest on their mortgage. This means that the rate cannot change as long as they have that loan. Recent events in the financial markets have emphasized the benefits of having a rate that cannot go up. If a person decides to take a shorter term on the loan, they will avoid a lot of interest charges but will pay a bigger monthly payment.
Credit cards are some of the most popular, well known and dangerous personal finance products available. They have a set spending limit and are accepted at almost any location. People can use them to charge purchases and not pay for the purchase from their actual money at that time.
The best way to handle ones credit cards is to always pay off the balance every month to avoid the interest charges. The credit card is actually a line of credit. If a person does not pay off the balance, they incur the interest charges. If one is carrying a balance on a credit card and making just the minimum payments, the majority of the payment goes to the interest and it takes a long time to pay off.
A home equity loan is basically a hybrid of a mortgage and a credit card. Essentially home equity loans are lines of credit that are secured with the house as a second mortgage. The loan amount is usually the equity in the house, or the difference between the value and the balance of the first mortgage.
Also similar to a credit card, the home equity loan can be reused as the the balance is paid off and credit becomes available. These loans generally carry a higher interest rate and take a significant amount of time to pay off.
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Source: http://financehelpnews.com/property-finance/quick-facts-for-different-finance-products
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