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Credit refers to borrowed funds provided by a lender to a borrower, typically with interest and repayment terms. Credits enable individuals and businesses to access funds for various purposes, such as financing purchases, managing cash flow, or covering unexpected expenses. Types of Credit 1. Installment credit: Fixed payments over a set period (e.g., mortgages, car…
A deposit is a financial transaction that involves adding funds to an account. It is a crucial aspect of banking and finance, enabling individuals and businesses to manage their money effectively. Types of Deposits 1. Cash deposit: Physical cash deposited into an account. 2. Electronic deposit: Funds transferred electronically. 3. Direct deposit: Automatic transfers from…
Interest is a fee charged or earned on borrowed or invested funds. It is a crucial aspect of personal and business finance, influencing financial decisions and outcomes. Types of Interest 1. Simple interest: Calculated on principal amount. 2. Compound interest: Calculated on principal and accrued interest. 3. Annual Percentage Rate (APR): Interest rate charged annually….
An investment is a financial asset or instrument purchased with the expectation of generating income or profits. Investing involves risk but can provide long-term financial growth and security. Types of Investments 1. Stocks: Equity in companies. 2. Bonds: Debt securities. 3. Mutual Funds: Diversified portfolios. 4. Exchange-Traded Funds (ETFs): Traded on stock exchanges. 5. Real…
A loan is a financial agreement where a lender provides borrowed funds to a borrower with the expectation of repayment, typically with interest. Loans cater to various needs, such as financing purchases, managing cash flow, or covering unexpected expenses. Types of Loans 1. Personal loan: Unsecured, for individual use. 2. Mortgage loan: secured for real…
A savings account is a type of bank account designed to help individuals save money while earning interest. Benefits 1. Earn interest: Grow savings over time. 2. Security: insured and protected. 3. Liquidity: Easy access to funds. 4. Low risk: stable investment. 5. Encourages savings: Separate from spending money. Types 1. Traditional savings account: Basic…
A credit limit is the maximum amount of credit extended to a borrower by a lender, typically on a credit card or loan. It represents the highest amount of debt the borrower can incur on the account. Types of Credit Limits 1. Credit Card Limit: The maximum amount that can be charged on a credit…
An interest rate is a percentage charged on borrowed money, representing the cost of borrowing for the borrower and the income for the lender. Interest rates vary depending on the type of loan, borrower’s creditworthiness, and market conditions. Types of Interest Rates 1. Fixed Interest Rate: Remains constant throughout the loan term. 2. Variable Interest…
An annual fee is a yearly charge levied by financial institutions on credit cards, loans, and other financial services. It is essential to understand the purpose and implications of annual fees to make informed financial decisions. Types of Annual Fees 1. Credit Card Annual Fee: Charged on credit card accounts. 2. Loan Origination Fee: One-time…
A credit score is a three-digit number that represents an individual’s or business’s creditworthiness. It plays a crucial role in determining loan approvals, interest rates, and credit limits. Maintaining a good credit score is essential for financial health. Types of Credit Scores 1. FICO Score: Most widely used credit scoring model. 2. Vantage Score: Alternative…