14 Financial Terms Everyone Should Know

David Sung | May 24, 2013

Financial terms can be confusing, but don’t let them stop you from investing your hard-earned money, or stop you from refinancing your home. We have compiled a list of the most common financial terms, and made them easier to understand.

Allocation- the process of dividing expenses and incomes across various departments or branches of a business.

Disinflation- when the rate of inflation begins to slow

Fixed Assets- a long-term asset such as a building, furniture, or vehicles

Home Equity Line of Credit- a line of credit that is the maximum amount a customer can borrow, and they can use their home equity as collateral.

Home Equity Loan- when a borrow uses their home equity as collateral for a loan

Keogh Plan- a defined-benefit or defined-contribution retirement plan for self-employed individuals or unincorporated businesses.

Mortgage Discount Points- this is considered a type of pre-paid interest. A lender will charge the borrower points to increase the loan above the amount of the given interest rate.

Mutual Fund- a collection of funds from several investors with the purpose of being invested into stocks, bonds or other assets.

Prime Rate- the interest rate given by banks to large corporations and is largely determined by the federal funds rate.

Return on Investment- profit made from an investment before taxes are taken out

Required Minimum Distribution- the federally mandated minimum required amount that must be given to a retirement account to an IRA holder

Share- a divided value of a company given a monetary unit

Stock- another term for a share or equity

Sunk Costs- a cost that has already been incurred and cannot be regained. Sunk costs usually help a company or individual determine how to proceed financially.

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