Home | Finance

Financial Jargon translated

By: Katharina Beath

Read More About Finance

Whenever you start looking for a financial product it''s important that you know what you''re looking for so that you can get the best deal for your particular circumstances. Unfortunately, most financial terms come with specialist terms that people may have heard, but may not be perfectly clear on.

When it comes to shopping for a loan in particular, the list of words that you need to know is actually quite short. Here''s a quick guide.

Interest Rate

The interest rate is the rate at which your debts will increase, it''s also commonly known as APR (which stands for annual percentage rate).

In real terms, then, if you took a loan of ?10,000 which had an interest rate (or APR) of 20%, at the end of the first year you would owe an extra 20% of the original sum, meaning that you would owe ?12,000 (assuming you hadn''t paid anything else).

Accordingly, the lower the interest rate, the better the loan may prove to be.

Term

The term of any financial product is the length that it lasts. So a loan with a term of twenty years will take you twenty years to pay off. A short term loan is a good idea because it means you''re in debt for less time, but interest rates are often higher as lenders look to maximise their profits. On the other hand, the shorter the term, the less time you will have to accrue debt, so it''s about striking a balance.

A secured loan is one where something else is considered part of the deal so if you can''t meet repayments then that item is forfeit. A common type of secured loan is a mortgage, where, if you don''t meet repayments you stand to lose the house. Secured loans have lower interest rates than unsecured loans, as the lender is more confident you won''t default and so can afford a long term loan.

A secured loan is one where the debt is literally anchored on another item of value, most commonly your home. If you don''t meet the repayments (as with a mortgage) then that item of value is forfeit. Secured loans generally have lower interest rates as the collateral makes it less likely you''ll try and default and therefore lenders are more willing to offer longer term deals. Secured loans are often for loans with greater value.

An unsecured loan is one that has no collateral. Instead of losing an item of value if you can''t pay the loan you''ll probably be credit blacklisted which will have serious implications on your long term ability to get credit.

These are the main terms when it comes to looking for a loan, ideally you want a short term, low interest, unsecured loan, but these are pretty impossible to come by so it''s all about finding the right balance. Make sure you look around thoroughly to get the best deal possible.

Article Source: http://depositarticles.com/

Katharina Beath is the author of this article. Alliance

Please Rate this Article

 

Not yet Rated

Click the XML Icon Above to Receive Finance Articles Via RSS!
Additional Articles From - Home | Finance
Sign Up for a free account.
Our other websites
All about SEO
Beauty Tips Forum
Submit Articles
Member Login
Link Us
Submission Guidelines
Ezine Notifications
Article RSS Feeds
Sitemap
New Stuff
About Us
Developer
Good shopping portal
Link to Us
Contact Us
Privacy Policy
Terms of Service

counter easy hit

Powered by Article Dashboard