Financial Terms You Should Be Aware Of

November 28, 2015

Do you know these financial terms?

Just like technology, there are many terms in the domain of finance that are really hard to grasp for the layman. Like technology has ubiquitous computing and IOT, finance has also got its prime rates, amortizations and compound interests. These terms completely baffle the people with little or no experience in finance and because our country’s normal citizen is always in some sort of financial crisis, the more they know the better.

Here we have compiled a list of only some of the terms that we believe are very important for the common man to know about. There are a lot more terms that need to be elaborated but these are some that needed to be talked about:

Amortization: In the world of today, everybody has to take a loan every now and again. When you take a loan for a new house or for a car, you are also given an amortization schedule. This piece of paper explains to you how much you would have to pay over a month and what would be the total affected amount. The term amortization refers to the payment of a huge sum of money over small installments every month (or over another period of time). This includes interest and principal.

401(k): This is a retirement savings plan that is offered by a majority of the companies to their employees. Upon the signing of the 401 (k) savings funds’ contract, a small part of your salary gets deposited to an account and after retirement you would be able to enjoy these savings.

APR: Annual percentage rate is the interest rate that you would pay on a loan that you couldn’t manage to pay during its legal deadline.

ARM: ARM stands for Adjustable rate mortgage. The interest rate changes over a specific period of years for this mortgage plan.

Capital gain/loss: IF you end up selling something for a larger amount compared to what you actually paid to acquire it, then you have won a capital gain. The opposite is true for incurring a capital loss.