Great Advice For Money Interest

Introduction

There are two sides to money interest, and that is the interest earned and interest paid. The former comes from such undertakings as investing in securities, lending out money, putting money in a savings account and so on while the latter type of interest is an expense coming from undertakings like business loans, mortgages, home improvement loans and so on. For a successful investor, both types are very important and worth considering. In fact, most of the small details that are usually overlooked usually count significantly towards once returns on investment. Before one can venture into anything where money interest is involved, it is important for them to first consider some important tips.

Step 1

The first tip with money interest is to clearly understand the difference between the APR and APY. APR refers to the Annual Percentage Rate while APY refers to the Annual Percentage Yield. Both the two are interest rates, but the former is an expense while the latter is an income. Only venture into an investment option when you are certain that the APY is more than the APR. Use this difference to compare the various investment tools available. For instance, you might be presented with two certificates of deposit, one at 5.8% and the other at 6.1%. However, unless the two offers disclose the APR, then you could make a wrong decision. The first offer might have its APY calculated as compound interest while the latter could be using simple APY. With time, of course compound interest would be a better investment rate platform than simple interest despite the low deposit rate in the example above.

Step 2

Secondly, if you are taking large loans for business development and investment purposes, then it is wise to consider going for the Interest Only Loans. These are loans where the principal amount isn’t paid for a given timeframe. However, during this period, the borrower only settles the interest on the loan. After the period expires, then one can choose to either settle the principal or go for loan refinancing. A typical example where Interest Only Loans are important is for business property development where returns on investments are realized after sometimes.

Step 3

With savings accounts, the best idea would be to go for higher interest rate accounts. A great money interest advice is that one should know that banks are out to make money, and unless you ask which are these savings accounts with high interest rates, then the bank will be comfortable to give regular rates on your savings. In most cases, checking accounts usually have high interest rates, though with other qualification criteria thrown in the mix, for instance maintaining a certain minimum balance.

Step 4

Fourthly, money interest investments require a great deal of research. Many people usually outlook this simple fact, but the truth of the matter is that comparing various rates before settling for a particular choice is very crucial. And when comparing the investment options, be sure to look out for keywords in the fine print, like gross and net interest rate , simple and compound interest rates and so on.

Step 5

Last but not least, with money interest rates on loans, try as much as possible to borrow only when and what is necessary. Saving for investment is always a better option as opposed to going for loans.

Tips

There are of course many more money interest tips that one can follow when investing or taking a loan, but they are worth considering. Many tips depend on the type of market, existing market conditions, political environment among other factors. The key important factor is to capitalize on available opportunities.

Comments