Financial Terms:
Understanding Basic Finance Terms
If
you’re like many, you don’t always understand what people are talking
about when it comes to loans. Without understanding the basic financial
terms
when it comes to loans you just aren’t setting yourself up right to make
an educated decision when it comes to applying for a loan. There are
hundreds of financial terms; Below are some of the most important:
Assets
Assets
can be described as anything that holds value. Assets can be all types of
things from cars to houses. Assets can be used in helping to build credit.
For example if you are applying for a house loan, you might use your car
as an asset, to show that if you default on a payment, that you have
assets to fall back upon such as your car.
Capital
Capital
can be a bit of tricky term as it can be used in several different
situations to do with finances. Capital can be described as the assets
that are available for use towards creating further assets; it can also
apply to the cash in reserve, savings, property, or goods.
Debt
Debt is
amount of money or something of value that is borrowed from a person
referred to as a debtor. Usually a debt that is borrowed will carry some
type of penalty along with the payback such as an interest, or service.
Debt
Consolidation
Debt
Consolidation is replacing multiple loans with a single loan that is
normally secured on property. This can often reduce your (the borrowers)
monthly outgoing interest payments by paying only one loan which is
secured on the property sometimes over a longer term. Because the loan is
secured, the interest rate will generally be considerably lower.
Equity
Equity
is the difference between the value of a product (for example a house) and
the amount that is owed on it.
Liabilities
Liabilities refers to the sum of all outstanding debts in which a company
or individual owes to it’s debtors.
Principal
Principal is used to describe the amount of money that is borrowed without
including any interest or additional fee’s.
Term
Term
refers to the length of a debt agreement. For example if you were to take
out a loan for a house over 10 years. 10 years would be the term.
Ryan Fyfe is the owner and operator of
Loans Area. Which is a great web
directory and information center on Loans and related issues like Debt
consolidation and Credit issues. Ryan Fyfe may be contacted at
http://www.head-ache-pain.com/
Ryan Fyfe is the owner and operator of several websites.
