Home loan – Know about different kind of home loan

To acquire new home most of the people are taking home loan to meet their requirement. But they do not follow the document when they sign on it and finally they fall in financial crisis. In order to avoid the situation you first must understand that what kind of home loans you need and what will be the rate of interest and the monthly installments which are very important to know before taking any kind of loan.

The most common home loans are being offered by lenders:

Fixed-Rate home loans

In this scheme borrowers have to pay a certain interest rate for the entire loan term. The monthly installments will be divided equally for the years that you have taken to repay your complete loan amount. Your last installment amount will be the same as the first.

Adjustable-Rate home loans

Under this scheme the interest rate is paid on the outstanding loan amount which varies according to a specific benchmark. When you take the loan the initial interest rate is normally fixed but it is reset periodically. It may reset monthly, quarterly or yearly. Some of these loans have the caps on the interest rate, which make the borrower benefited.

Interest-only loans

Initially it may be a good idea as you can make a smaller payment for the first few years by paying the interest only, but later on you may fall in a great trouble if you are not so careful about your loan. In recent years it is seen that many borrowers are paying more than his home is worth. They forget that their loan amount is going to double or even triple at the end of the loan period. This makes them unable to pay remaining loan amount.

That is why it is very important to understand the every scheme before taking any kind of loan.

Mutual Funds – What are mutual funds?

Mutual fund is a kind of fund where many investors invest their money in shares, bonds, cash etc. The concept of mutual fund is to reduce the investment risk. If you invest in one company, your investment risk will be high because at any moment the value of share of that company may come down and you have to bear huge loss. If you invest in mutual fund, your investment risk will be reduced, because it is a pool of money and invested in several companies so that if the share value of one company goes down then the share value of other company will meet the loss. Mutual fund is managed by fund manager who are responsible for profit and loss. The profit and loss if any incurred is distributed among all investors. In this way investors do not have to bear huge loss.

How do asset management companies raise the money?

The asset management companies find out the profitable avenues where investors can invest their money and gain their profit. Based on those profitable opportunities they launch NFO (new fund offer) which can meet investors’ requirement who have same interest.

A prospectus is released by AMC where you can find every detail of the fund, avenues and about the company where the investors can invest their money. After complete study of the prospectus if the investors believe that it is profitable for him, they invest in the fund.

Where do AMC invest the fund?

The asset management companies invest the fund in the several companies, in the share of the company. These funds are called ‘equity mutual funds’.

Similarly, they invest fund in the government securities or corporate debt. These funds are called ‘debt funds’. The debt fund never gives high return but here your fund is secured. You do not have to bear high risk.

Stocks and shares – Understanding stocks and shares for beginners

If you are beginners in stock market and do not have any knowledge on finance market but interested to invest in stocks, your first step is to understand stocks and finance market. Stock is the unit of ownership in a company. If you acquire a share of company’s stock, you become a part owner of the company.

You have the voting right on selecting the members of the board of directors and other important matters of the company. Being a part owner of the company you are also entitled to get dividend if company declares it.
Being a part owner of the company only your stocks become worthless in case of company’s insolvency. None of the creditors have right to take over your personal assets. But for private-held companies it is not applicable.

Types of stocks:

1. Common stock

2. Preferred stock

Common stock: Most of the common stock is held by individuals. Whoever acquires major part of the stocks can play big roll on the decision of the board of directors. Every individual is entitled to have voting right on the company’s affair along with share in dividends. The value of common stock may increase or decrease everyday. It depends on the volume of buying or selling of the shares.

Preferred stock: The investors who need consistent profit via dividends should buy preferred stock. It has first right to get dividend if company declares it. But preferred stock has fewer rights on the company’s affair than common stock. In case of insolvency preferred stock holders will have first right to get their invested amount. So your money is safe if you invested in preferred stock.

Liquidity of stocks: You can purchase or sell the common stock everyday. It is highly liquid. Sales proceed may take 2 or 3 days to be credited in your account.

Life Insurance Policy – Important things to consider when buying life insurance policy

1. Do you have dependents?

If you are married and have children then it is your duty to take care their financial needs in the future. One day you will be retired and your income will stop but your expenditure will not stop. After your retirement you may need to fulfill your children requirement like their school funding, tution fees and general finance. A good life insurance policy can cover these things and fulfill their financial needs.

2. Features of insurance policy

A good insurance policy can fulfill your requirement. So it is mandatory to know the feature of the policy which you opt to purchase. There are many policies and insurers who provide insurance policy, but it depends on your requirement that what kind of insurance policy can meet your financial needs and help you to make a good financial planning.

3. What should a life insurance policy cover?

A good life insurance policy should leave enough fund for your family that they can meet their financial needs, your funeral expenses in case of your sudden death and any debt that you should leave behind to repay.

4. Types of protection you need

There are many policies in the market and every policy has different feature and protection. So you have to purchase a right policy that can meet your financial needs.

5. Who will be the beneficiary of this policy?

The beneficiary is the person who gets the amount after maturity of the policy. And it depends on the policy holder to whom he makes the beneficiary.

6. How old are you at the time that you apply for the policy?

Your age may effect on your insurance premium when you are going to get a life insurance policy. Because the premium cost may differ at different age level. If you are thirty, your premium cost will be less and if you are forty, your premium cost will be higher than that.