Choosing to Borrow

Question 1

Borrowing

Answer 1

getting money from a lender that must be repaid in the future e.g. mortgage

Question 2

Mortgage

Answer 2

long term loan often secured on a house, which remains the property of the banks until it is paid off

Question 3

Credit Card

Answer 3

purchasing goods or services using borrowed money up to an agreed limit. You must pay off the minimum amount each month (usually 3-5% of the balance) Interest rates are high

Question 4

Store Card

Answer 4

cards used to purchase goods or services on credit from a store, up to a pre arranged credit limit. Terms are similar to credit cards. Interest rates are high

Question 5

Personal Loan

Answer 5

a loan given for something e.g. extension usually unsecured

Question 6

Hire Purchase

Answer 6

renting an item like a piece of furniture from a shop. You only own the furniture once the final payment has been made. Extremely high interest rates – look for Interest free credit deals. E.g. DFS

Question 7

Overdraft

Answer 7

borrowing up to an agreed limit on a current account. Daily interest is charged it must be paid back and can be called in at any time by a bank

Question 8

APR

Answer 8

Annual Percentage Rate – the interest rate charged on loans to help compare their rates.