3 types of financial products
As people reach the age of adulthood, there is a true recognition of the value of money. As a child, the concepts of finance, expenditure, and financial products are only understood on an extremely basic level. The first stage in a child’s financial life is when they grow old enough to receive pocket money from their parents. This typically is introduced around the age of six or seven. Giving children a small weekly amount of money can help them to learn some key financial concepts relating to budgeting and saving, which can be invaluable skills in later life. As a child becomes an adult, they may choose to go into higher education such as university or college. Here they will gain a more in-depth understanding of managing their finances to allow them to buy study essentials while having enough money to plan food and entertainment budgets. As adults start their first meaningful employment, they will become aware of a range of common financial products that may be required at various life stages. This article explains three different financial products in detail.
Mortgages
In the vast majority of personal circumstances, a mortgage will be required to fund the purchase of a home. This involves seeking a mortgage broker, speaking to a bank, or building society to find out what level of finance is available to them based on their own financial situation and levels of income. The average age of a typical first-time buyer is 34 years old. This age has risen in recent decades due to the rising price of homes which similar levels of income have not matched. Most mortgages involve a long-term loan that can range from around 15 years to 30 years in duration in most circumstances. It is important to save money towards a new home, as many mortgage providers will expect a down payment on the total cost of the property, which typically ranges from 4% to 10% of the home’s total value.
VA loans
A Veteran Affairs (VA) loan is a financial product that is similar to a mortgage. The key difference is that VA loans are specifically designed for people who have served in the armed forces or are still active in the military. They are commonly used to finance the purchase of a new home but differ from conventional mortgages as they often have lower rates of interest and may not require a down payment on a property. The US government introduced these financial products in 1944 to make it easier for military personnel returning from WW2 to get back into civilian life.
Car loans
Purchasing a new car is one of life’s biggest single purchases apart from the purchase of a property. New cars often cost tens of thousands of dollars, and as such, a person will require a loan to fund their total cost. The average interest rate for a car loan (APR) is around 5%, making them a reasonably attractive proposition. However, it is important to consider that a range of factors will be considered before the loan is approved, and rates may vary. A key determinant is a person’s credit rating. Lower credit ratings will often result in a higher rate of interest, so it is vitally important that action is taken to improve credit scores before seeking a car loan.
