Finance Article written by Editorial Staff at www.collegeplastic.com
When it comes to saving, borrowing and investing, the amount of financial jargon involved can be enough to make anyone’s head spin. But at some point in your life, you’re likely to need to know about one or all three of these aspects of finance. With a basic understanding of bank rates, personal loans and investments, you can make financial decisions knowledgeably and set yourself up for a more stable financial decision-making process whenever you consider investing your money or taking out a personal loan or college student credit card.
Bank Rates
Bank rates are found in the interest you accrue with a Certificate of Deposit (CD) or on a checking account. They’re also found in the interest that’s attached to your car loan or home mortgage.
By depositing money into a CD or another interest-bearing account, not only are you placing your money there to keep it safe and build interest, you’re also allowing your bank to use that money as part of their assets. In this case, the bank will pay interest on your account. When borrowing monies from the bank, the interest is added to the money you owe.
Bank rates vary in accordance to many factors. The financial market, inflation, economy, and supply and demand all play a part in determining a bank’s interest rates. As these factors fluctuate, bank rates change, too. Because of this, it’s always wise to choose a fixed-rate loan to avoid having to pay higher rates of interest due to changes in the market.
Personal Loans
A personal loan is a tool you can use to borrow money from a bank or lending institution in order to pay for something you need or want. Taking out a personal loan should be preceded by some research and serious decision-making since, once you are given the loan, you will commit to repaying it.
Understanding Bank Rates, Investments and Personal Loans
People take out personal loans for a variety of reasons. A personal loan can help you buy a new car, fix up your home, or be used for other important personal needs for which you’re not able to pay out-of-pocket. Personal loans shouldn’t be taken out casually or frivolously and are not an effective tool for getting out of debt because they only add more debt.
Anyone can apply for a personal loan, but must meet the qualifications of the lending institution in order to be awarded the loan. To determine your credit worthiness, the lending institution will look at your credit history to see if you’re a worthwhile risk. While there are personal loan options for people with bad credit, the interest rates on these types of loans are extremely high to compensate for taking you on as a credit risk.
Investments
The term “investment” is often used to describe things such as a new car or a timeshare on a vacation condo. Even a college degree is referred to as an investment in your future. But investments that involve investing your money are different from these types of things.
An investment is the process of using or investing money to receive profit in the form of money, interest, capital gain, appreciation in value or income. When a person decides to invest their money, they do so in the hopes of making money off of the investment. The money made can be in the form of profit when selling stocks, interest accrued in a money market fund or through the increased value of your investment.
There are several ways in which to invest money, including mutual funds, stocks, bonds, gold, futures and real estate.