Savings bonds are often purchased as a gift. If a friend or relative is having a baby, for example, you can give a savings bond as a gift for the new child. The child can then cash it in whenever they want, like when they graduate from college or want to buy a home of their own. They will receive the original investment, plus whatever interest was earned. Alternate names: Treasury bonds, Series EE bonds, Series I bonds...
Home equity loans are flexible, allowing you to use the funds for almost anything. While there are some disadvantages, many homeowners find this is an ideal way to tap into their home’s equity when they need cash. Learn more about the benefits and risks of home equity loans. How Can You Use Your Home Equity Loan? Typically, lenders don’t place restrictions on how you can use a home equity loan....
When a company has an asset that was purchased for one amount of money but is unexpectedly now worthless (and the company believes it will not be able to recover the loss) that asset is deemed “impaired.” Impairment and Write-Offs In early 2000, AOL and Time Warner combined in a $165 million merger of two media and internet behemoths. The merger was a big deal at the time but proved to be one of the most disastrous transactions in the history of corporate America....
It can take some time to pay off a home equity loan, so what happens to it after the original borrower dies? Does your family have to pay off your loan? Learn some of the options your heirs will have in case you die before you can fully pay off your home equity loan. What Happens to Debt After Death? When you die, your debts are treated differently depending on the type of debt, any credit insurance you have, and the agreements you may have with your family or guarantor to pay off the loans....
Notably, 401(k)s are a type of defined contribution plan. This means that no set amount of benefits is promised at retirement. Instead, employees elect to contribute the desired portion of their wages for retirement to an individual account set up for each employee. These accounts also accept employer contributions. They’re rewarded for these contributions with tax breaks that vary based on the plan type. Alternate definition: 401(k) is also the subsection of the Internal Revenue Code that established 401(k) plans....
Learn more about how central banks carry out these goals, their origins, and what critics have to say. Definition and Example of a Central Bank Though they may be established by a governing body, central banks are independent authorities. They have a number of duties related to monetary policy, providing financial services, regulating lower banks, and conducting research. Central banks aim to keep a nation’s currency and economy stable. Most central banks are governed by a board consisting of its member banks....
Definition and Examples of Cleanup Requirements Cleanup requirements exist on some types of revolving loans or lines of credit. These loans allow borrowers to access credit up to a set limit as needed at predetermined rates. Borrowers make payments based on how much they have currently borrowed. A cleanup requirement on a revolving loan or line of credit mandates the borrower periodically pay their balance down to $0 and maintain a $0 balance for a set period of time....
Cryptocurrency is a form of digital currency managed using a blockchain. A blockchain is a public database that acts as an undisputable ledger tracking cryptocurrency transactions held by a distributed network of computers called miners. There are many self-directed IRA providers, such as TrustCapital, Alto, Rocket Dollar, Bitcoin IRA, and BitIRA, that offer cryptocurrency Roth IRAs. How Does a Cryptocurrency Roth IRA Work? Roth IRAs are designed to be funded with after-tax money, and qualified distributions (withdrawals that meet a certain criteria) are tax-free....
Each of the three major credit bureaus—Equifax, Experian, and TransUnion—calculates scores using FICO’s formulas and information in detailed reports they keep on your credit history. Scores range from 300 to 850, with a higher score representing a lower risk to lenders. In terms of general meaning, scores higher than 700 are considered good, while scores higher than 750 are considered excellent. Scores lower than 650 generally are considered bad, and lower than 600 are very poor....
A haircut refers to the percentage difference between the amount of the loan given and the value of the asset used as collateral. For example, let’s say small bank A needs to borrow from big bank B. Small bank A wants to borrow $500,000 and puts up assets as collateral to borrow that loan. Big bank B values those assets at $375,000—or 25% less than the loan amount. The 25% difference is the haircut....
Tony Anderson / Getty Images If you’ve recently lost a loved one, you may not feel prepared to make big financial decisions, but it’s important to understand the tradeoffs and advantages of choosing income (via a life insurance annuity) over a lump sum. What Is a Life Insurance Annuity? A life insurance annuity is a method of paying out a death benefit over time. Instead of paying out the entire amount in a single (often substantial) lump sum, the life insurance company can set up a stream of payments....
Alternate name: No-penalty CD You can avoid having to give up interest earned or pay other fees like you would with a traditional CD as long as you follow the rules. But early withdrawals before day seven can lead to a penalty that may be based on the simple interest your CD would’ve accrued the first seven days. Say that you have $5,000 to invest in an 11-month liquid CD that’s paying an interest rate of 0....
With many investment strategies, the whims of the market can drive returns, rather than the investor’s decisions. For example, a fund manager might invest heavily in tech companies, thinking that this sector will outpace an overall market benchmark, like the S&P 500. Yet an economic recession might prompt a wave of investors to sell their stocks and hold cash, causing tech stocks to decline in value just as much as, say, retail stocks—a sector that is generally volatile and unpredictable....
Mergers can involve more than one company, but most often they involve just two companies. Let’s explore some of the reasons why companies may merge, and what it means for shareholders. Definition and Example of a Merger A merger is when two companies that are approximately the same size combine in a way that results in a new company. In a merger, the two companies combine their assets and liabilities....
Definition and Example of a Mortgage Recast A mortgage recast is when your current lender recalculates the monthly payments on your loan based on the outstanding balance and remaining term. Often, when you’re thinking about recasting your mortgage, you’ll put down a lump sum of money toward the principal. While your interest rate and term will remain the same, the lender will then calculate a new monthly payment based on the reduced balance....
Many adjustable-rate mortgages act as hybrid loan products and experience mortgage reset dates because they have a fixed interest rate for a certain period of time, such as three or five years. After that, the interest rate will fluctuate according to the underlying mortgage index and market rates. Let’s take a look at mortgage reset dates, how they work, and what they mean for you. Definition and Examples of Mortgage Reset Dates There are multiple types of adjustable-rate mortgages, but popular options contain a hybrid approach that combines two separate loans: the fixed-rate mortgage and the adjustable-rate mortgage....
Mutual funds can be traced all the way back to 1774 when Dutch merchant Adriaan van Ketwich proposed a financial arrangement that involved pooling money from multiple investors to make investing available to the masses rather than a rich man’s game alone. Others date its origins to 1822 when King William I of the Netherlands was thought to have created the first closed-end investment company. However, the first modern mutual fund wasn’t introduced until 1924....
Learn more about how nonprofit organizations work and the special tax treatment they receive from the federal government. Definition and Examples of Nonprofit Organizations (NPOs) A nonprofit organization can be a corporation, association, or one of several other entity types that does not distribute any profits for the benefit of its members or similar parties. In many cases, a nonprofit also does not intend to generate a profit, such as a charitable organization that raises money, then distributes grants or saves funds to be able to make future donations....
Understanding how payment-option ARMs work will help you determine whether this type of mortgage is the right choice for you. Definition and Example of a Payment-Option ARM A payment-option ARM is an adjustable-rate mortgage with multiple payment options. These options include: Traditional payments: If you choose traditional payments, you’ll pay enough each month to cover both your principal and interest. You can choose either 15-, 30-, or 40-year fully amortizing payments....
Alternate name: Concessional loan While lenders offer most loans with the goal of earning a profit, they offer soft loans for other reasons. Soft loans might be used to address disasters such as the growing refugee crisis and to strengthen or weaken allegiances between nations. For example, in 2021, the Export-Import Bank of India agreed to provide a soft loan worth $10.4 million to Eswatini to construct a disaster recovery site....
