Borrowing Flashcards
2 advantages of overdrafts
Interest only charged on what’s borrowed
Can be prearranged, helping to pay off short-term funds
2 disadvantages of overdrafts
Interest is high
Penalty charges if you go over the predetermined amount agreed with the bank or if you have an unarranged overdraft.
Creditor can call it in time
2 advantages of personal loans
Fixed interest rates allows easier budgeting
Monthly instalments allow you to spread the payment, helping to fund short term cash shortages and plan expenditure
2 disadvantages of personal loans
Collateral given if loan is not repaid
Can be charged a penalty for early payment
2 advantages of hire purchase
Monthly instalments allow you to spread the payment, helping to fund short term cash shortages and plan expenditure
Allows you to buy an expensive item at an amount you can afford
2 disadvantages of hire purchase
Falling behind with payments can cause lender to repossess the car
Don’t own the item until all payments have been made, thus preventing you from selling or modifying the car
2 advantages of a mortgage
Fixed or tracked mortgage rates can help make payments more affordable.
Allows you to buy your home and spread the cost over a long period
2 disadvantages of a mortgage
Interest rates may increase
Failure to repay can lead to property being repossessed
2 advantages of a credit card (borrowing)
Paying full amount each month
= no interest
2 disadvantages of credit card (borrowing)
Paying the minimum amount shown on the statement leads to interest on outstanding balance, interest more than personal loan
2 advantage of a payday loan
Fast/easy access to cash
No collateral needed
2 disadvantages of payday loans
Expensive way to borrow, High interest rates and fee is charged
Short term loan, making it hard to repay the loan, affecting credit rating if not paid
