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.
A person is usually better off with a fixed rate mortgage. This means that the interest rate does not change as long as they have that loan. As rates generally go up over time, this protects borrowers from rising payments and avoids interest charges. Accepting a shorter financing term such as fifteen or ten years will also avoid a large amount of interest but will require that the borrower pay more per month.
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.
A person can us a home equity loan similar to a credit card in that as the loan is paid down, the available equity or credit can be re used. Also similar to a credit card are the relatively high interest charges.
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.
A person is usually better off with a fixed rate mortgage. This means that the interest rate does not change as long as they have that loan. As rates generally go up over time, this protects borrowers from rising payments and avoids interest charges. Accepting a shorter financing term such as fifteen or ten years will also avoid a large amount of interest but will require that the borrower pay more per month.
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.
A person can us a home equity loan similar to a credit card in that as the loan is paid down, the available equity or credit can be re used. Also similar to a credit card are the relatively high interest charges.
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