What are liquid assets?

The term liquid asset refers to financial resources that can be converted to cash with relative ease. This type of assets covers cash, US treasury bills, money market mutual funds, bonds, stocks, etc. In some states, precious metals such as silver and gold are also regarded as liquid assets. Money is the most liquid assets of all. Investments in the futures and stock markets are more liquid than investments in residential property. In fact, the most liquid market is the foreign exchange market because huge amounts of money change hands every day. In this sense, a single person or company cannot influence the exchange rate.

A characteristic feature of liquid assets is that they are readily saleable on the market. There is a high degree of certainty about the value of liquid assets: the price level of the next sale is typically close to the level of the last trade.

In simple words, a liquid asset is one that can be exchanged efficiently for another good or asset. Assets are described as liquid if they are sold quickly and with no loss of value. For example, one may be able to sell his car or house on eBay in a couple of hours, but there is a good chance that the assets would be sold for less that they are worth. Assets such as real estates and houses take longer to sell at a reasonable market price and are less liquid. Fixed or illiquid assets are not readily saleable as there are no markets to regularly trade them on (or their value is hard to determine).

In personal finance, liquid asset (apart from cash, funds in checking accounts, etc) is any item that may be sold at a fair market price is a short amount of time. These may be appliances, CDs, collectibles, and anything else that brings a good amount of money fast. In the world of business, liquid assets are the assets which a company can sell or trade quickly: cash, stocks, bonds, and funds in banks. Companies have to dispose of liquid assets in order to keep up with their payments. Businesses that do not have an adequate amount of liquid assets can go bankrupt because of a cash flow crisis. However, if a company has too many liquid assets, it is not profiting from these resources by investing them.

Market makers, together with speculators, are the major contributors to assets’ liquidity. These are companies and individuals seeking to make profit from the rising and falling prices of particular assets. They dispose of and provide capital which increases liquidity.

Central banks are key players when it comes to increasing the liquidity of money. They implement various monetary policies to exert control over the monetary supply of the country. Central banks buy and sell government securities and other financial instruments and use interest and exchange rates to implement monetary policy.

How to get the best loan in Canada?

The first thing to consider when contacting your potential lender is your credit score. As a rule, Canadian loan applicants with higher credit score are considered more reliable payers than those who have a lower credit score. Therefore, they usually qualify for the best interest rates that a lender has to offer. Before applying for a mortgage or a loan consolidation, the first thing to do is to check out your credit history. If you spot any inaccuracies, get in touch with your credit bureau and ask them to re-examine and correct your credit score. However, if your credit score is poor, it is best to raise it before you file an application for another loan.

Getting the best loan is as much a matter of careful planning and research, as it is a matter of negotiation. Once again, your credit score comes in handy – applicants with higher credit scores usually hold stronger positions when negotiating with their lending institution or bank. Keep in mind that most banks typically have options to adjust the interest rate on your loan in your favor, or waive certain service fees.

Being a diligent payer involves a careful monthly budgeting as well as good planning of your financial future. You probably know that you should not take more than you can carry. This rule of thumb is also valid for loans – you should not apply for a loan that will break your back in the long run.

If you are planning to apply for a mortgage, you have to consider how long you intend to stay in the house. If you plan to inhabit it for, say, five or six years, you will probably benefit more from a floating interest rate. On the other hand, if you plan to use your home for some twenty or more years, you may benefit more from the stability of a fixed interest rate.

When choosing your lender, you should compare fees as well as interest rates, plus the annual percentage rate of the loans they offer. If you are applying for a mortgage, you should ask your potential lender or, even better, each of the lenders you contact, to give you a formal “good faith estimate” of all fees you’ll incur with your loan. Thus, you will get a detailed breakdown of costs which is much more accurate than the overview that you’ll get with a mortgage offer. In addition, you should make sure that your Canadian lender understands your individual circumstance and specific financial needs. For instance, some lending institutions have developed special loan offers for applicants with poor credit, while others may have more diverse financing solutions for those who can afford relatively small payments. If you are planning to pay off your mortgage in advance, ask the lending institution for any prepayment penalties.

Sources: Dictionary of Financial Terms