Fixed-rate and adjustable rate mortgages are the two most basic kinds of mortgage loans. You can choose a mortgage with the same interest rate forever, or one that changes.

Fixed-rate Mortgages

This is a very stable kind of mortgage. A fixed rate mortgage keeps the same interest rate for the life of the loan. For most people, especially first time homebuyers, this is the best option because you pay the same monthly principal and interest rate.

Adjustable Rate Mortgages (ARM)

Interest rates for adjustable rate mortgages (ARM) can change over time. Some people like these because you can get a lower interest rate and monthly payment in the beginning of your mortgage. Every ARM starts with an adjustment period, a specific amount of time when your interest rate stays the same. After this, your interest can go up or down, and can only go as high as the lifetime cap.

There are many combinations of fixed-rate and adjustable rate mortgages, so be sure to consult your homeownership counselor for help.

There are two types of auto loans: long-term and short-term.

Lending companies usually offer long-term loans only for new cars. A long-term loan generally lasts for a period of 36, 48 or 60 months. Loans for used vehicles are usually only available for shorter terms of 24 or 36 months.

Longer term plans carry a smaller monthly payment; however, you will pay more over the life of the loan. A three-year $15,000 loan that is lengthened to four years will decrease your monthly payment from $450 to $377. However, your interest rate will increase from 5 percent to 9.5 percent. The total amount you pay over the life of the loan would increase from $16,200 to $18,096. Our Auto Loan Early buyoff calculator helps you find out how much interest can you save by increasing your monthly payment (shortening your loan term).

One potential pitfall of a long-term loan is that the car's value can drop below the loan principal amount if the vehicle is destroyed or stolen during the first year or two.

Short term plans will mean higher monthly payments, but you will be charged less interest and will pay less overall.

Savings Accounts

Savings accounts are a safe haven to store your emergency funds. They provide easy access to your money and are generally insured. If you or your family’s deposit accounts at one FDIC-insured bank or savings association total $100,000 or less, your funds are fully insured. The chief drawback of such accounts is that interest rates tend to be low since they offer a very high degree of safety.

CDs (Certificates of Deposit)

A CD is a special type of deposit account that typically offers a higher rate of interest than a regular savings account. Just like savings accounts, CDs are also insured up to $100,000. When you purchase a CD, you invest a fixed sum of money for fixed period of time. Usually, the longer the period, higher is the interest rate. There are penalties for early withdrawal.

 

Money Market Deposit Accounts

These accounts generally earn higher interest than savings accounts. They are very safe and provide easy access to your money. They are also insured by the FDIC. They offer many of the services that checking accounts offer, however, a limit is normally placed on the number of withdrawals or transfers you can make during a given period of time.

 

Stocks

When you buy stocks, you own a part of the company’s assets. If the company does well, you may receive periodic dividends and/or be able to sell your stock at a profit. If the company does poorly, the stock price may fall and you could lose some or all of the money you invested.

 

Bonds

A bond is a certificate of debt issued by the government or a company with a promise to pay a specified sum of money at a future date and carries interest at a fixed rate. Bond terms can range from a few months to 30 years. Bonds are tradable instruments and are generally considered a safer than stocks because bondholders are paid before stockholders if a company becomes bankrupt. Independent bond-rating agencies rate the likelihood that any given bond will default.

 

Mutual Funds

A mutual fund is generally a professionally managed pool of money from a group of investors. A mutual fund manager invests your funds in securities, including stocks and bonds, money market instruments or some combination of these, based upon the fund’s investment objectives. By investing in a mutual fund you can diversify, thereby, sharply reducing your risk. Most mutual funds charge fees. You often pay income tax on your profits.

 

Annuities

Annuities are contracts sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement. Earnings cannot be withdrawn without penalty until a specified age and are taxed only at the time of withdrawal. Annuities are relatively safe, low-yielding investments. An annuity has a death benefit equivalent to the higher of the current value of the annuity or the amount the buyer has paid into it.