Financial Terms 101

August 14, 2023

by Christian Phillips

Do you understand those complicated and mundane bank terms? We did the dirty work and provided definitions to improve your financial literacy.  

Adjustable Rate:
An adjustable-rate mortgage (ARM) is another type of home loan with an interest rate that changes periodically. Interest rates on ARMs are fixed for specified periods, then change at yearly or monthly intervals. Dependent on the market status, a borrower’s monthly mortgage payment, and interest rate can either increase or decrease after the fixed period ends. 

APR:
The Annual Percentage Rate is the amount you are charged yearly for borrowing money from a lender or creditor.

APY:
The Annual Percentage Yield determines the total amount of interest you will earn yearly, including compound interest on qualified accounts such as savings, checking, or certificate of deposit.

Certificate of Deposit:
A certificate of Deposit (CD) is an account where consumers can deposit money and earn interest for an indicated period. CDs generally pay higher interest rates than standard checking and savings accounts. Early withdrawal penalties may apply.

Checking Account:
Checking accounts are used to deposit money for earned wages. This account is attached to debit cards and checks, which can be used for “everyday spending.”

Credit Report:
A detailed statement prepared by the credit bureaus outlining credit history. The report includes four categories; personal information, credit accounts, public records, and inquiries. Lenders will determine creditworthiness after analyzing the report summary.   

Conventional Loan:
A conventional loan is a mortgage loan that is not government-backed. Conventional loans are originated and serviced through private lenders, such as banks and other financial institutions. Government-backed loans are subsidized and protect lenders against defaults on payments.

Debit Card:
Debit cards are attached to your checking account, which allows you to initiate transactions online or in person for goods and services.
 

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