As already mentioned in comments, using the built in service definitely works for folders. As for files, if you were to open them in finder, nothing would happen unless you can first established default editors in your .bash_profile.
If you're not dead set on using the right click menu, one way to open a folder location or file with terminal without downloading additional software would be to drag a file or folder onto your Terminal icon in the Dock. I do this often and it works great.
BarryMode's answer creates a sub menu item and you have to be in the parent directory for the menu item to work on a given directory.
This tool solves both of these issues. It allows you to open terminal from any directory while you are in the directory. The tool also allows you to write simple shell scripts to add more custom options to the right click menu. The tool is free and there is a GitHub link on the tool's page if you want to check the source.