Does financial jargon like inflation or ROI confuse you? Don't worry, we know it can be intimidating. Mastering your financial vocabulary will help you take the first step towards financial independence. We’ve put together a list of must-know terms to help you along the way.
Budget
Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Since budgeting allows you to create a spending plan for your money, it ensures that you will always have enough money for the things you need and the things that are important to you. Learn how to create a budget and stick to it.
Credit Score
A credit score is a three-digit number calculated using your credit report, which helps lenders decide whether to give you credit. One way of thinking about it is to see it as a measure of risk to the lender. Your rating takes into account how well you've paid back any debt you've had in the past and how much debt you currently have. Your score is also used to establish your interest rate for credit cards, bonds, vehicle finance, and more. Find out about how your credit history can impact you.
Compound Interest
Compounding means that when you invest your money, interest is not only calculated on the principal amount invested but also the earned interest that you have accumulated.
Inflation
An increase in the price and value of goods and services, often represented as an annual percentage.
Interest
Interest is what you pay for borrowing money, or what you receive for depositing savings. It’s expressed as a percentage rate over a period of time.
Interest Rate
Interest is the cost of using somebody else's money. When you borrow money, you pay interest. When you put money in a savings account, you earn interest.
Personal Debt
Personal debt is debt owed for which you personally are legally responsible. Personal debt also can be secured or unsecured. Secured debt is debt acquired by putting up some form of collateral. Unsecured debt relies solely on your promise to pay. Find out more about debt management here.
Personal Loans
A personal loan is an unsecured loan typically for a period of six to sixty months. Repayment is usually by way of monthly instalments over a fixed loan period. Wonga offers personal loans from two to six months where first time customers can borrow up to R4000 and existing customers can borrow up to R8000.
Repo Rate
The repo rate is also known as the repurchase rate and refers to the rate at which the Central Bank lends money to local banks in the private sector. Changes in the repo rate influence the prime overdraft rate – this is the benchmark rate at which private banks lend to the public. When the banks lend money to consumers, the interest they charge can be above, at or below the prime overdraft rate. This rate is based on the consumer’s spending behaviour and credit history.
Short-term Loans
Short-term loans are considered to be different things by different lenders. For example, a bank might consider a loan of one year to be a relatively short-term loan. Wonga’s definition of a short-term loan is a cash advance for up to 30 days, which you settle with one simple repayment on the date that you choose.
Learn more financial terms here.
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