Chapter Five Flashcards
- What is a secured loan?
A borrower is required by the lender to put up some collateral (land, house, insurance policy) as protection against the risks involved in the borrower’s investment opportunity or need. Collateral is a borrower’s way of backing up the promise to repay the loan.
- What is a non-secured loan?
A borrower does not have to put up collateral (land, house, insurance policy) because the lender relies on the credit reputation of the borrower. Non secured loans may carry a higher rate of interest than secured loans. Some but not all overdrafts are non secured loans.
- What does APR stand for?
- Who dictates base interest rates in Ireland?
European Central bank and the Irish central bank.
- How would you establish a Good Credit Rating?
Couldn’t find answer so I presume 7 credit principals.
- List TWO items of documentation which may be needed by lenders to judge whether or not to lend to a person or business.
Your last two years’ certified/audited accounts
Last 6 months business bank account statements (if business account is not with same Bank)
Couldn’t find answer so googled and got above.
- What type of purchase/investment would you avail of a long term loan.
Lasts 7 to 20 years. To purchase assets like land and for large building investments. A house mortgage lasts for up to 30 years.
- Borrowing on your current account is known as what in terms of Finance.
An overdraft.
- For what type of purchase/investment would you avail of a medium Term Loan?
Lasts from 3-7 years and are used to purchases items like machinery, cars, buildings and home improvements.
- What is the length of a short term loan?For what type of purchase/investment would you avail of a Short Term Loan?
1-3 years and is used to pay for breeding stock, college fees, machinery etc.
- What is the main use of ‘Hire Purchase’?
The purchase of cars and machinery and expensive household goods. Under this system the hirer pays for the goods over a number of years and will not fully own them until the last payment has been made.
What are the advantages of credit?
What are the seven credit principles?
What are the different types of credit?
What’s an overdraft and a term loan?
What are the different types of term loans?
Short term
Medium term
Long term
What’s merchant credit?
What are sources of borrowing?
Leasing companies: the leasing company purchases the equipment or machinery and rents it out.
Individuals: friends or family. Terms of the agreement including interest rate, repayment schedule etc should be put in writing
What’s a fixed rate and a variable rate?
What do repayments depend on?
