Financing Options for Larger Purchases - Essay Example

It is like a contract between two parties written for engaging in a transaction. The selling party must fulfill all the obligations written in the contract for the transaction while the buyers must also engage themselves in the particular transaction. Different financing options have different prices depending upon the value of the asset which is to be bought or sold. Usually the values of asset are currency or bonds or it may be future contracts along with a premium package till the expiry of the contract.

When the option is exercised within due time, the other party collects its premium from the buyer & deliver the asset to the buyer. If the option is not fulfilled into the due time of expiry, the contract is considered void. There are such types of options too in which the actual buyer of an asset sell it to someone else, this is known as the exchange of option. Usually, all kinds of financial options are provided by finance corporations or by investment banks. Whenever there is a contract held between two parties considering any of the financial options, the terms of the option are required to write down.

It must always mention the quantity & type of asset to be purchased & at what value it is going to be sold out. The expiry date is also mentioned in the contract & also some other terms & conditions upon which the whole contract is written, like the premium amount, the interest rate etc. The options are mainly of two types, the exchange-traded options which have a set of pre-defined contracts like stock options, bond options, index options etc, & the over the counter option which is not on an exchange & is simply between two parties.

There can be as many terms & conditions in the latter one as both the parties want, depending upon their particular situation & the kind of valuable asset. There are also employee stock options typically in US which are in a form of an incentive from a company to its employees (PETCHERS. 2003). Purchasing of a house or a car or something big like these always require some time to stop & think deeply what & which kind of financial option will suit according to the current situation anyone is facing.

They are a real necessity & thus cannot be avoided. On the other hand, one must look into his/her budget & the actual need for that very item. One should not get tempted from the luxurious items which are out of range & should not get over spend. The one who has the money should be the one to decide what option will better suit him/her & what will not. At what interest rate can anyone afford the installments & thus before signing over any contract the details must be well read by the purchaser.

Personal finances such as house, car, large electronic appliances etc need a lot of financial planning with respect to the budget & savings & considering future financial risks. Several ways to earn right amount of financial assistance at right time include insurance policies, investments in some business or in stock market, social security plans & benefits, saving accounts & consumer loans etc. When looking for financing of large purchases, the easiest & the best way is the exchange-trade option, which is always standardized & the set of rules is pre-defined very clearly so that there would be no ambiguity remains in the contract.

There can be installments procedure in which there are 3 months, 6 months or sometimes a 9 month installment can be made in order to cover the whole price of the asset. As there has been throughout computerized