If you’ve ever found yourself scanning the myriad of financial websites on the internet and wondering what half the information on the page actually means, you’re certainly not alone. In the world of finance, there is more jargon than most people would consider healthy, and it can often be difficult to decipher its true meaning.
As such, here is a handy finance jargon buster which should help to clear up some of the confusion.
This usually refers to shares in a company, and how much of the company an investor owns. For example, someone who has purchased 30% of the shares in a company could be said to have 30% equity.
When money, be it a loan or savings, accrues interest, it increases regularly. For a £1000 loan, for example, a yearly interest rate of 20% would increase the money needed to be paid back to £1200 after one year. There are different types of interest, such as compound interest, but the basic principle always remains the same.
This simply relates wealth which company or individual possesses. This could be in the form of money, assets or both, and is often used in relation to investment.
Everyone who has used credit in the past, be it for a credit card, loan or anything else, will have a credit score. This is what lenders use to determine whether you are a safe investment, and those with a poor credit score will struggle to find lenders willing to give them a loan.
If you have failed to meet loan or repayments or even bill payments on time in the past, you may have bad credit, which is the same as a poor credit score. There are lenders, like Ocean Finance, which offer credit specifically for people with bad credit, and this can help them rebuild their credit rating.
Lenders often want insurance against the loan they will be providing, to make sure they are covered if you can’t pay it back. A secured loan is one which also has a security, such as a house, included as a backup, which goes to the lender in the case of a default. An unsecured loan does not include this, but will usually have a significantly higher interest rate, making it more expensive.
Hopefully these explanations will help to give you a better understanding of those financial websites next time you use them. After all, it is crucial that you know the ins and outs of any financial product before you invest.