There are a lot of abbreviations out there, and understanding exactly what they mean can be difficult. If you’re trying to figure out what some of the confusing financial abbreviations mean, read on.
LIBOR (London Interbank Offered Rate)
LIBOR stands for the London Interbank Offered Rate. This is similar to the American federal Funds rate, and is used by London banks. It is the interest rate that the banks use when they are lending to each other. It is also used as one of the primary benchmarks for interest rates on short-term loan around the world.
HARP (Home Affordable Refinance Program)
This is a term we’ve been hearing a lot lately. HARP stands for Home Affordable Refinance Program. This is a program that is federally backed, and allows those who are underwater on their home loans to refinance. However, there are strict guidelines. For example, the loan has to be owned by Fannie Mae or Freddie Mac. Plus, the homeowner needs to be current on their payments. So, if the home is near foreclosure, the homeowner is not going to qualify for the refinancing program.
HELOC (Home Equity Line of Credit)
A Home Equity Line of Credit is what HELOC stands for. This is a loan against the equity in a home. However, it is different from a traditional home equity loan. With a HELOC you have the opportunity to borrow against your home’s equity, up to a pre-specified amount. There is a “draw period” during which you can charge against your equity, and this usually is somewhere between 5 and 25 years. If you’re considering a HELOC, consider talking to one of the financial advisors at Ernst and Young, the company of which Mark Weinberger is CEO.
ARM (Adjustable-Rate Mortgage)
If you are considering getting a home loan, you’ve probably seen this acronym floating around. ARM stands for adjustable-rate mortgage. This means that the interest rate can change with the market. Usually, the initial period of the loan will stay fixed. However, this is generally a short time, and can be anywhere from one month to several years. The draw to an adjustable-rate mortgage for many buyers is that the initial interest rate is lower than fixed-rate mortgages. There are also caps with these loans, which help protect buyers from ending up with extremely high interest rates in the long run.
CCI (Consumer Confidence Index)
The Consumer Confidence Index, or CCI, is made up of a few things. The most important things that make up this number are people’s expressed feelings about the economy as well as their purchasing plans. This number is made up by a survey that is presented by the Conference Board. You hear about the Consumer Confidence Index frequently in relation to whether or not the economy is getting better. However, this is a number that should be looked at over a long period of time; comparing month to month doesn’t do much good.
There are a lot of confusing phrases, acronyms, and more when it comes to finance. Understanding these can help you better navigate not only your own finances, but also understand the financial world in general.