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Business - Section A - Personal And Business Finance > Managing Finances > Flashcards

Managing Finances Flashcards

1
Q

What is an overdraft ?

A

An overdraft is a short term loan which can be used to pay bills if you’re short of cash . Arranged with the bank up to an agreed amount when your account is below £0

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2
Q

What is a personal loan ?

A

A personal loan can be used to purchase an expensive item such as a car . Fixed amount is paid back monthly with fixed interest

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3
Q

What is a hire purchase ?

A

A hire purchase is where you put down a deposit and pay in monthly instalments

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4
Q

What is a mortgage ?

A

A mortgage is a loan which is taken out to purchase a property , usually over 25 years and is paid back in monthly instalments

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5
Q

What is a credit card ?

A

A credit card is usually used to buy goods and services where you spend up to the amount agreed and make a minimum payment each month

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6
Q

What is a payday loan ?

A

A payday loan is a short term loan , usually for small amounts for people who need cash between pay days

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7
Q

Advantages of an arranged overdraft ?

A

-usually free to set up
-you can only pay interest on the money you borrow
-arranged overdrafts are much cheaper than unarranged ones

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8
Q

Disadvantages of an arranged overdraft ?

A

-interest is high and you will be charged a fee to use your overdraft
-if you go over the overdraft limit then there will be penalty charges
-could affect your credit rating score

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9
Q

Advantages of personal loans ?

A

-monthly instalments allow you to plan your expenditure

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10
Q

Disadvantages of personal loans ?

A

-if you fail to make payments on a secured loan , you may lose the asset it is secured against
-if you have a poor credit score , higher interest rate s

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11
Q

Advantages of hire-purchases ?

A

-spreads payment over a long period of time
-allows you to but an expensive item at an amount you can afford

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12
Q

Disadvantages of hire purchase ?

A

-pay more than the value of the asset
-don’t own the asset until its paid in full

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13
Q

Advantages of a mortgage ?

A

-allows people to buy a property such as a house
-payments are spread over a long period of time

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14
Q

Disadvantages of a mortgage ?

A

-if repayments are missed then the property can be repossessed
-not completely your house so can be repossessed if miss payments

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15
Q

Advantages of a credit card ?

A

-if you pay the full amount each monthly , you will pay no interest
-allows money in your account to get interest while spend credit card money

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16
Q

Disadvantages of credit cards ?

A

-can encourage overspending
-high interest if not paid off in full every month
-interest rates are higher than personal loans
-charged interest on outstanding amount

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17
Q

Advantages of Payday loans ?

A

-accessible to those with poor credit scores
-help with short term cash flow problems

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18
Q

Disadvantages of pay day loans ?

A

-very high interest rate so is a very expensive way to borrow

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19
Q

What is an ISA ?

A

An ISA is a type of saving account where the holder is not charged income tax on the interest received

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20
Q

Advantages of ISA’s ?

A

-Interest rates are slightly higher than alternative saving accounts
-tax is not charged on the interest

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21
Q

Disadvantages of ISA’s ?

A

-There is a limit on the amount you can put in an ISA each year
-notice is required to make withdrawals and can be a limit to the amount of times you can make a withdrawal

22
Q

What are deposits and savings account ?

A

Deposits and savings account is where interest is paid on the balance

23
Q

Advantages of savings and deposits accounts ?

A

-interest is earnt
-accounts can require you regular deposits which encourage you to follow a saving plan

24
Q

Advantages of savings and deposits accounts ?

A

-interest is earnt
-accounts can require you regular deposits which encourage you to follow a saving plan

25
Disadvantage of deposits and saving accounts ?
-interest earned is taxed
26
What a premium bonds ?
Premium bonds are a government scheme which allows individuals to save up to a set amount by buying bonds where entered to win cash prizes
27
Advantages of premium bonds ?
-chance to earn substantially more than what could be earned in interest -can be easily withdrawn at anytime with no penalty or loss
28
Disadvantages of premium bonds ?
-no guaranteed return on investment -maximum account is reviewed annually by the government
29
What are bonds and gilts ?
Bonds and gilts are where the lender , lends money to companies and the government in return for interest payments
30
Advantages of bonds and gilts ?
-regular fixed returns -spreads the risk across a range of markets
31
Disadvantages of bonds and gilts ?
-risk of losing some or all of the value of the investment if the bond or gilt fails
32
What are shares ?
Shares give investors part ownership of a company and the shareholders receive dividends from the company’s profit
33
What are advantages of owning shares ?
-share prices can fluctuate offering the potential of a high reward -as part owners they may get additional benefits such as discounts
34
What are disadvantages of owning shares ?
-share prices can fluctuate so potential risk of loss -no guarantee of reward
35
What are pensions ?
Pensions are where individuals make regular contributions to a pension which are saved for retirement
36
What are advantages of pensions ?
-encourages individuals to save throughout their working life in preparation for retirement - an individuals savings are boosted by employer contribution
37
What are disadvantages of pensions ?
-moving between jobs , reduces overall value of the savings -final outcome is difficult to predict
38
What are the 6 types of insurance ?
-car -life -travel -pet -home and contents -health
39
What are the factors affecting insurance ?
-excess -medical conditions -job -level of cover -previous claims -location -annual or monthly payments -supplier
40
What are advantages of motor (car ) insurance ?
-satisfies the legal requirement for car owners to have insurance -three levels of cover to meet individual requirements (third party ,third party fire and theft , fully comprehensive ) -can build up no claims bonus -provides protection against liability claims from other drivers
41
What are disadvantages of motor (car) insurance ?
-expensive for new or young drivers -policy excess can add to costs in the event of a claim
42
What are advantages of home and contents insurance ?
-home insurance covers the cost of rebuilding or repairs as a result of fire , flooding or subsidence etc -contents insurance covers loss or damage to personal possessions -security precautions can reduce premiums
43
What are disadvantages of home and contents insurance ?
-only covers the cost of rebuilding the property , not the market value
44
What are advantages of life insurance ?
-life insurance pays out a sum of money in the event of a death -pay out may be larger than the total amount of premiums paid
45
What are disadvantages of life insurance ?
-pre existing medical conditions may not be covered
46
What are advantages of travel insurance ?
-provides cover for delays , cancellations of trips -provides cover for the loss of personal possessions while on the trip -provides cover for emergency medical expenses
47
What are disadvantages of travel insurance ?
-pay outs may not cover the full amount of the financial loss -high risking sport activities usually require an additional premium -pre existing medical conditions are not covered
48
What are advantages of pet insurance ?
-vet bills can be expensive -cover provided for personal injury to damage caused by the animal -can opt for lifetime cover for serious illnesses for an additional premium
49
What are disadvantages of pet insurance ?
-pre existing medical conditions aren’t covered -some policies will limit the amount of medical expenses covered -vaccinations aren’t covered
50
What are advantages of health insurance ?
-covers some or all private medical costs with convenient treatment times -you can choose the type of illnesses and treatment you want to cover
51
What are disadvantages of health insurance ?
-pre existing medical conditions are not covered -medical conditions which arise during the initial period of the policy may not be covered
52
Why is it good to use price comparison websites ?
-helps consumers to see a wide range of options -saves time -convenient and available 24/7 -ability to use filters to be able to compare -provides up to date information -easy to use

Business - Section A - Personal And Business Finance (5 decks)

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