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What is finance and what do you need to know? Finance can mean different things. It may refer to your personal financial situation. It could refer to your investments or a business's investments. It could refer to a credit or loan purchase.

Financing can be involved in your life in different ways.
For example, if you are going to invest in a large purchase such as a house or even a car. Large furniture purchases and credit cards all fall into these categories. Interest rates are the most integral part of financing. Why else would a company want to loan you money or offer you credit? How else would they benefit? They benefit from the interest that you have to pay in on financing your loan. There are different types of financing options available.

The percentage rate is the amount of interest that you pay.
The percentage rate is the certain portion of your loan or credit that you pay back in interest. For example, if your loan was for ,000 and your interest rate was 12.3% then you would pay 12.3% of ,000 in interest. The interest would be added onto your ,000 and you would pay it back via your monthly payments.

Fixed rate: A fixed rate means your interest rate will stay the same no matter what. People usually prefer these. If you can get a low fixed rate, it will stay with you even if other average interest rates are going up. Balloon rate: A balloon rate can fluctuate with the times and the stock market but depending on the situation, this can be beneficial to you as well. You will have to decide which you think is best for you.

There are different types of financing options as we mentioned earlier. Probably the most common example of finance in the United States is credit cards. A credit card allows you to make purchases with the card. The bank issuing the card will pay on your behalf and you then pay the bank back, plus the interest. The bank makes money off the interest and you get what you want right away.

The same thing applies to pay-as-you-go or rental furniture companies. There are even rent-to-own housing services now where your monthly rent can go towards buying the house if you want to stay. Financing should be a way to help you achieve something that you're going to be purchasing anyway.
Financing can get you in your house quicker than saving up the cash. Become knowledgable and financing can be a tool that will serve you well.

About the Author

The author has discovered that what you do NOT know about your finances can hurt you. She has shared her knowledge and tips about finances with thousands of people and helped them to have a good relationship with money and financial matters

Kathleen Sutera is founder of All About Finance an excellent resource site dedicated to information on finance