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Crucial Financial Terms That Everyone Must Learn Today

One of the most popular reasons why most people dread finance is because of the terms that are used. It is for the reason that people find it easier as they learn and understand more financial terms which brings the need for everyone to learn some of the most popular and commonly used financial terminologies. Reading through this article enlightens anyone interested in finance some of the significant terms that they should expect to meet and even use daily throughout their financial journey as seen below.

First on the list comes compound interest which refers to the interest on the amount of money that one may have either borrowed or deposited. Click this link to get more info. Every time someone saves or invests their money, they earn compound interest on the amount they deposit in addition to any interest that they accumulate over the specified time. The case is, however, different for borrowers as the compound interest is charged on the amount that they initially borrowed in addition to the interest charges that are added to the outstanding balance over time.

Next on the list is FICO score with most people not knowing that FICO is an acronym for Fair Isaac Corp, which is the compound that came up with this technique of calculating a borrower’s credit score. The score is based on multiple factors ranging from one’s payment history and the length of credit history to the amount that the borrower owes the lender. The FICO scores range between 300 and 850 and just as anyone would guess, the higher the score, the better the terms a borrower can receive on their next credit card or loan. Get more info on these financial terms. It is also vital to note that most borrowers with scores less than 620 often have a harder time securing loans and if they do, then the terms may not be as favorable as desired especially the interest rate.

There is also net worth which is another popular financial term that basically refers to the difference between one’s assets and their liabilities (what one owns and what they owe respectively). All one needs to do is add up all the money and investments that they have together with the current market value of the home(s) and car(s) as well as the balances in any checking, retirement and other investment accounts plus all the savings. It is the total above from which one subtracts all their debts inclusive of the mortgage, credit card balances as well as any other loans and obligations. The result gives the individual’s net worth which helps them to know the pulse of their overall financial health. Learn more from  https://www.dictionary.com/browse/finance?s=t.

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