As a new decade approaches, the thoughts of most people turn towards improving their own financial position in life. There are many ways to make use of credit and other investment related tools in order to do this. To begin, it is helpful to know some of the financial terms that are tossed around today and how they apply to each individual seeking a better future when it comes to money.
Important Mortgage Terms
If you have plans of going after the American Dream in the coming year and buying your own home, you will want to know about the following terms related to securing a mortgage.
Annual Percentage Rate
This is will tell you the interest rate you will pay each year over the life of the loan. Keep in mind that the rate can change if you have an adjustable rate mortgage, so you will want to look for those terms spelled out in the contract.
Closing Costs
This is the amount of money that you will need to pay, usually out of pocket, to get the mortgage in the first place. It is important to know what this figure is so that you can better plan out your budget.
Earnest Money
If you are serious about buying a home, you will need to put up some earnest money. You can look at this as a deposit. It will be held by the title company and applied to your closing costs when you have finally secured the mortgage.
Mortgage Insurance
If you are unable to pay a large enough deposit on your home, the mortgage company will usually mandate that you take out an insurance policy. This will usually be added into your monthly payment.
Loans Terms You Should Know
There are going to be times in your life when you need a personal loan in order to achieve your financial goals. In order to get the best possible loan package, you will need to know about the following terms and how they relate to your situation.
Personal Loans
These are typically unsecured loans that you take out when you have an emergency need for cash, such as to pay for medical expenses or needed home improvements.
Bad Credit Installment Loans
If an individual’s credit score is less than desirable, bad credit installment loans may help them secure the cash they need to cover an unexpected emergency that needs to be addressed right away. Note this is recommended only if they do not have enough savings on hand.
Line of Credit
This refers to the amount of cash that you can gain access to in an emergency. It is often attached to the equity that you have in your home.
Credit Terms That You Should Know About
Here are some of the credit related terms you should be aware of in 2020.
Credit Rating
Your credit rating determines how much of a perceived risk you are to creditors. The better your credit rating, the more access you have to lower interest rate loans.
FICO Score
This is a numeric score that tells creditors many things about your past performance in handling credit. Some loans will require a certain FICO score in order to get approved.
Net Worth
Your net worth is the sum of all of your assets, including cash, minus your current liabilities.
Knowing these terms will help you in your efforts to become more financially savvy in the coming decade. It is important to know how to use loans to your advantage and how to stay away from money options that are just not good for you. If you can do these things, then you will be well on your way to increased financial freedom in the coming years.