Borrowing for Households And Indviduals - Chapter 15 Flashcards
What is borrowing?
Borrowing means receiving money from a person or financial institution, in exchange for a promise to pay back the money, with interest at an agreed time in the future.
What is interest when borrowing from a financial institution?
Interest is the additional cost on top of the money you borrow that you must pay if you are borrowing money from a financial institution
Explain 3 Factors to consider before borrowing?
- Do I really need the item?
- Can I get the money any other way, without having to borrow?
- Can I afford the repayments?
What is instalment?
Instalment is a fixed sum of money due on the same date for a specified period of time until the loan plus interest is repaid.
What is an asset?
Asset is anything owned by an individual, household or business that is worth money e.g a house,
What is credit worthiness
Credit worthiness is an estimate of someone’s ability to pay off a loan based on their saving and borrowing history.
What is a guarantor?
Guarantor is a person who has a good credit rating who agrees to pay your loan for you if you are unable to do so.
What is collateral?
Collateral: is something, usually an asset, used for security for repayment of a loan e.g the deeds to a house. If you cannot repay the loan, the financial institution can take the asset to pay the loan.
What is insolvent?
Insolvent means when a person is unable to pay their debts off as they need to.
What is responsible for borrowing?
Responsible Borrowing means that you do not borrow more than you are able to pay back.
