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					Understanding Basic Finance Terms

If your like many, you don't always understand what people are talking
about when it comes to loans. Without understanding the basic terminology
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 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.

				
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Description: Investment, Money, Financial, Credit Card