Understanding Your Finances Can Give You Power And Choice

What is finance and what do you need to know? Finance can mean different things. It may refer to your personal financial situation. It could refer to your investments or a business's investments. It could refer to a credit or loan purchase.

Financing can be involved in your life in different ways.For example, if you are going to invest in a large purchasesuch as a house or even a car. Large furniture purchases andcredit cards all fall into these categories. Interest ratesare the most integral part of financing. Why else would acompany want to loan you money or offer you credit? How elsewould they benefit? They benefit from the interest that youhave to pay in on financing your loan. There are differenttypes of financing options available.

The percentage rate is the amount of interest that you pay.The percentage rate is the certain portion of your loan orcredit that you pay back in interest. For example, if yourloan was for $40,000 and your interest rate was 12.3% thenyou would pay 12.3% of $40,000 in interest. The interestwould be added onto your $40,000 and you would pay it backvia your monthly payments.

Fixed rate: A fixed rate means your interest rate will staythe same no matter what. People usually prefer these. If youcan get a low fixed rate, it will stay with you even ifother average interest rates are going up. Balloon rate: Aballoon rate can fluctuate with the times and the stockmarket but depending on the situation, this can bebeneficial to you as well. You will have to decide which youthink is best for you.

There are different types of financing options as wementioned earlier. Probably the most common example offinance in the United States is credit cards. A credit cardallows you to make purchases with the card. The bank issuingthe card will pay on your behalf and you then pay the bankback, plus the interest. The bank makes money off theinterest and you get what you want right away.

The same thing applies to pay-as-you-go or rental furniturecompanies. There are even rent-to-own housing services nowwhere your monthly rent can go towards buying the house ifyou want to stay. Financing should be a way to help youachieve something that you're going to be purchasing anyway.Financing can get you in your house quicker than saving upthe cash. Become knowledgable and financing can be a toolthat will serve you well.

The author has found that most people have little or no knowledge about financial matters. She believes this is not a "bad" thing. It's just that they haven't been taught about money. The "good" new is that financial knowledge is a learnable skill, just like learning to ride a bike.She enjoys sharing and teaching people how to have a harmonious relationship with money and their finances.Kathleen Sutera is passionate about finance and is the webmaster of Finance How