1. Money terms and definitions: From what are mutual funds, Annual Percentage Rate to compound interest, here is a brief list

Money terms and definitions: From what are mutual funds, Annual Percentage Rate to compound interest, here is a brief list

You no longer have to feign understanding of money terms that are foreign to your common parlance.

By: | Published: July 12, 2017 5:00 PM
money terms, money terms definitions, Escrow, mutual fund, credit score, annual percentage rate, Compound Interest, Certificate of Deposit (CD) There are certain terms that are used in business and money matters which people expected to know. (Reuters)

You no longer have to feign understanding of money terms that are foreign to your common parlance. According to CNN Money, there are certain terms that are used in business and money matters, which people expected to know, but unfortunately most get through life by evading this part of their education. Fret not, for here are brief explanations of some of those terms that you have been hesitating to ask! Read on and remember, this will stand you in good stead for the rest of your life as far as money matters are concerned:

Escrow
Escrow account is for equity deals, transfers in real estate, loan repayments, bond redemption. Generally it is a safe place where transactions between a buyer and seller can take place. This gives the buyer who is buying home, for instance, the space to pull out of the deal if things are not at par with expectations.

Mutual Fund 
Through mutual funds investors can jointly invest in stocks and bonds which they may not be able to do so individually. Investment professionals generally take care of your savings which makes them less prone to risks.

Credit scores 
The score range could be good or bad depending on you. If you pay your debts on time and maintain low credit balances then you will get a good credit score. The score ranges from 300 to 900, with 700 considered as a good credit score, according to Mohan Jayaraman, Managing Director, Experian Credit Bureau.

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Annual Percentage Rate (APR) 
This is a rate charged annually for borrowing money and can be easily confused with interest rate. The difference between the two is that the APR includes other fees and transaction costs that the lenders would disclose at the time of giving you money. At the end of the year, this is the total amount of money you will be paying as interest.

Compound Interest 
This can be a good and a bad thing depending on the kind of money matter you are involved in. If you are investing, then a compounding interest means that your return on investment would grow. Interest on an investment is reinvested and the cycle continues till your owriginal amount grows. However, if you are in debt, then this kind of compounding interest could drain out your savings quickly.

Certificate of Deposit (CD) 
An investment practice where a small amount of money can be invested for a certain period of time and garner some interest. Since it is not a saving account, you cannot take out that money lest any emergency befalls you without paying a fine. According to Reserve Bank of India’s guidelines, a CD can only be issued by scheduled commercial banks and certain financial institutions permitted by RBI. The minimum amount of the deposits cannot be less than Rs 1 lakh.

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