Different Types Of Borrowing Flashcards
What is an overdraft
A form of short term borrowing
What are the advantages of an overdraft
Flexible
Quick to arrange
Disadvantages of overdraft
Get charged for extended overdraft
Get charged if you go over overdraft limit
Bank can ask for the money back
What is a personal loan
A sort of long term borrowing
What is the process of a personal loan
You have to explain to the bank what you would like the loan for
Once they check and approve the loan they send the money to your account
You get charged on interest until money is paid back
What is hire purchase
A financial plan that allows you to obtain an asset
What are the advantages of hire purchase
Immediate use
Fix payments (Consistent payments
Tax benefits
What are the disadvantages of hire purchase
High overall cost
Risk of repossession
Debt obligation
What is a mortgage
Long term loan made against properties
Advantages of mortgages
Home ownership( pay for house without needing money upfront
Equity/ ownership of building( build equity in your home while paying off mortgage
Appreciation
Disadvantages of mortgages
Long term debt
Additional costs
Qualification requirements( need stable income and good credit score)
What is a credit card
A short term form of borrowing
Advantages of credit cards
Safer than carrying cash
Build a positive credit score
Easier way to keep track of what you spend
Disadvantages of credit cards
Easy to spend beyond means
Unexpected fees
Interested charges are expensive
What is a payday loan
Short term form of borrowing
