A4 Managing Personal Finance Flashcards
Overdraft - advantages and disadvantages
overdraft lets you borrow money through your current account by taking out more money than you have in the account ADVANTAGES - include An overdraft is flexible - you only borrow what you need at the time which may make it cheaper than a loan.
It’s quick to arrange.
There is not normally a charge for paying off the overdraft earlier than expected.
DISADVANTAGES - Interest rates can be high, making it a costly way to borrow.
Borrowing limits are much lower than with a loan.
Your bank can reduce the limit or cancel your overdraft at any time.
As there is no repayment term, it can be easy to stay in your overdraft permanently.
Personal loans - dis and advantages
Personal Loan is an unsecured credit provided by financial institutions based on criteria like employment history, repayment capacity, income level, profession and credit history. Advantages of personal loans are Flexible use.
Lump-sum funding.
Fast funding.
Positive credit score impact.
Higher borrowing limit than credit card.
Lower interest rates than a credit card.
Predictable repayment schedule.
Flexible repayment terms.
DISADVANTAGES OF PL Debt
High interest rates
Prepayment penalties
Credit score damage
Hire purchase
method of paying for something in which the buyer pays part of the cost immediately and then makes small regular payments until the debt is completely paid. The buyer can use the product, but does not legally own it until all payments are made: They bought the car on hire purchase.
DISADVANTAGES-
High level of intrest
Missed payment can effect credit score
ADVANTAGES
Flexible repayment, paying of early in some cases
Approval less dependent on Credit score
Mortgages
mortgage is an agreement between you and a lender that gives the lender the right to take your property if you don’t repay the money you’ve borrowed plus interest. Advantages are
Impact on credit
Tax benefits
Favourable interest rates
Full home ownership
Disadvantages on mortgages are you’re committing to repaying a debt for a long time, often decades.
Credit cards
Already made a flash card on this but this is included in managing personal finance
Payday loans
usually a short-term, high- cost loan, generally for $500 or less, that is typically due on your next payday. ADVANTAGES -Easy to access. The most significant advantage for many borrowers is that payday loans are convenient and quick to access. …
They have fewer requirements than other loans. …
You can get approved with bad credit. …
It is an unsecured loan. …
There is a 14-day cooling-off period.
DISADVANTAGES-
They are expensive. For one thing, payday loans are sometimes very expensive. …
Payday loans are considered predatory. …
It is easy to get trapped in a cycle of debt. …
They have access to your bank account. …
Some payday lenders use questionable collection practices.
