Financial Terminology: More Financial Terms- Part 2

There's a lot of speculation about what to invest our money in today. Some think it is best to invest in real estate, some think it's best to invest in mutual funds, some think that gold is the best investment. Some would rather put their money under their mattress. I know the stock market has its ups and downs. One day it's up and the next day it taking a plunge. What is the best way to invest our money? I don't know, but there are investors out there who are making money so they must have the answers.

Those of us who are relying on credit cards to make ends meet are certainly not making good use of our money. The interest rates are high. On the other hand, the interest rates on savings and CD's are low! This bothers me to no end. I was in the bank the other day and I happened to be checking out the signs telling us the interest rates on CD's and savings accounts. None are over 1% except for maybe those that are for huge sums of money. Then right underneath was a sign for interest rates on loans. They are much higher than interest rates on our savings accounts and other investments. It is such a shame that they charge such high interest rates yet pay us such a small return on our hard earned money! I know that department stores and personal loans interest rates are running around 20 to 25%!

Now that I've got that off my chest, I'll get down to what this hub is really about. Many of us don't have a clue what many financial terms mean. I've included some that I run across at times and don't know what they mean. It may be important to you someday when you're signing a contract to buy a house or a car. I've tried to choose some words that may be of interest to you.

1.) Acceleration clause: A clause that requires that after one loan payment is late, the loan is in default and all remaining installments are due and payable at once or on demand of the lender.

2.) Adjustable-rate mortgage: (ARM) A mortgage in which the interest rate can fluctuate according to an index of interest rates prevalent in the economy as a whole. The mortgage payment will change after a time, and it more than likely will increase. This is also called a variable-rate mortgage.

3.) Earned income credit: A special income tax subsidy that the government pays to low-income working people with or without children.

4.) Net worth formula: A mathematical way of determining net worth by subtracting liabilities from assets.

5.) Prepayment penalty: A special charge to the borrower for paying off a loan earlier than the final due date.