3 - Types Of Borrowing Flashcards
What are 2 advantages of an overdraft?
Interest is only charged on what’s borrowed
Can be pre-arranged and meet short-term cash flow problems
What are 2 disadvantages of an overdraft?
Penalty charges can be high
Can encourage overspending
What are 2 advantages of a personal loan?
Budgeting is easier because of the pre-agreed payment plan
Useful for a specific item
What are 2 disadvantages of a personal loan?
High interest rates, unsecure loan
Not suitable for those with a bad credit rating
What are 2 advantages of a hire purchase?
Spreads expenses overtime
Credit is secured against the purchased item
What are 2 disadvantages of a hire purchase?
It’s a fixed contract, you could lose the asset if payment isn’t met
Likely to pay more for the asset overall
What are 2 advantages of a mortgage?
Spreads expenses over a long time period
Interest rates can be tracked against the standard variable rate
What are 2 disadvantages of a mortgage?
Enormous debt carried over a long time period
Assets can be repossessed if payment isn’t made
What are 2 advantages of a credit card?
Allows a period of interest-free credit
Provides some protection on purchases
What are 2 disadvantages of a credit card?
Can encourage overspending
High interest rates if the balance isn’t cleared
What are 2 advantages of a payday loan?
Fast source of cash
No credit report needed
What are 2 disadvantages of a payday loan?
Only used for a short period
High fees/interest
