Personal finance is something that everyone has to cope with, even if one does not have a job that is directly in the financial business. To be able to adequately and responsibly handle even personal finances, one should understand some basics about different finance products and what they are for.
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.
Another even more widely used type of finance product is the credit card. Credit cards are essentially portable lines of credit that are widely accepted around the world. They are used to make purchases that are paid for later.
Ideally, the charges made on the credit card will be paid off in full each month. If handled this way, there is no interest charge. However, many people carry a balance on the cards and wind up paying a lot in interest charges. If a person just makes the minimum payment, the balance will be carried for along time and will accrue a significant amount of interest.
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 you?re interested in commercial lending today, we would like to tell you more on equipment finance because we believe it is going to help you.
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