Borrowing Flashcards
What should you deciding to borrow money we should ask
- Do we really need this item?
- Could we wait until we have saved up the money we need
- Could we raise the money in other ways?
- Can we afford the repayments?
Who can we borrow money from
- Banks
- Building societies
- Credit unions
- Moneylenders
What are the rights of the borrower
- To be told the Annual Percentage Rate of interest
- To be told the total cost of the loan
- To be told the number of repayments of the amount of each repayment
- To be told any deposit or final payment
- To be told they have the right to cancel the loan agreement within 14 days
What are the responsibilities of a borrow
- To the budget properly and so be able to repay the loan each month
- To tell the truth when filling out the application form
- To use the money for the correct purpose
- To repay the loan in the agreed time
What is the information required by the lender when applying for a loan includes:
- Name and address of borrower
- Employment details
- Income details
- Other borrowings
- Present savings
What is interest
The price we pay for borrowed money
What is flat rate
interest is changed on the original amount borrowed.Interest does not decrease as the loan is repaid.Interest paid remains the same each year
What is the Annual Percentage Rate
True rate of interest.Interest rate changed that takes into account the amount owed is decreasing all the time.Includes bank fee.Interest paid will decrease each year
What is overdraft
Current account holders are given permission to withdraw more money than they have in their account, up to a certain limit.Interest is only paid on the amount borrowed
What is a term loan
Loan taken out for fixed period of time
What is mortgage
Loan term loan used to purchase property
What is security (collateral)
something of value belonging to the borrower that may be taken by the lender if the loan cannot be repaid
What is a guarantor
A person who agrees to repay a loan for another person if they are unable to do so
