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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
Q

Disadvantage of deposits and saving accounts ?

A

-interest earned is taxed

26
Q

What a premium bonds ?

A

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
Q

Advantages of premium bonds ?

A

-chance to earn substantially more than what could be earned in interest
-can be easily withdrawn at anytime with no penalty or loss

28
Q

Disadvantages of premium bonds ?

A

-no guaranteed return on investment
-maximum account is reviewed annually by the government

29
Q

What are bonds and gilts ?

A

Bonds and gilts are where the lender , lends money to companies and the government in return for interest payments

30
Q

Advantages of bonds and gilts ?

A

-regular fixed returns
-spreads the risk across a range of markets

31
Q

Disadvantages of bonds and gilts ?

A

-risk of losing some or all of the value of the investment if the bond or gilt fails

32
Q

What are shares ?

A

Shares give investors part ownership of a company and the shareholders receive dividends from the company’s profit

33
Q

What are advantages of owning shares ?

A

-share prices can fluctuate offering the potential of a high reward
-as part owners they may get additional benefits such as discounts

34
Q

What are disadvantages of owning shares ?

A

-share prices can fluctuate so potential risk of loss
-no guarantee of reward

35
Q

What are pensions ?

A

Pensions are where individuals make regular contributions to a pension which are saved for retirement

36
Q

What are advantages of pensions ?

A

-encourages individuals to save throughout their working life in preparation for retirement
- an individuals savings are boosted by employer contribution

37
Q

What are disadvantages of pensions ?

A

-moving between jobs , reduces overall value of the savings
-final outcome is difficult to predict

38
Q

What are the 6 types of insurance ?

A

-car
-life
-travel
-pet
-home and contents
-health

39
Q

What are the factors affecting insurance ?

A

-excess
-medical conditions
-job
-level of cover
-previous claims
-location
-annual or monthly payments
-supplier

40
Q

What are advantages of motor (car ) insurance ?

A

-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
Q

What are disadvantages of motor (car) insurance ?

A

-expensive for new or young drivers
-policy excess can add to costs in the event of a claim

42
Q

What are advantages of home and contents insurance ?

A

-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
Q

What are disadvantages of home and contents insurance ?

A

-only covers the cost of rebuilding the property , not the market value

44
Q

What are advantages of life insurance ?

A

-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
Q

What are disadvantages of life insurance ?

A

-pre existing medical conditions may not be covered

46
Q

What are advantages of travel insurance ?

A

-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
Q

What are disadvantages of travel insurance ?

A

-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
Q

What are advantages of pet insurance ?

A

-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
Q

What are disadvantages of pet insurance ?

A

-pre existing medical conditions aren’t covered
-some policies will limit the amount of medical expenses covered
-vaccinations aren’t covered

50
Q

What are advantages of health insurance ?

A

-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
Q

What are disadvantages of health insurance ?

A

-pre existing medical conditions are not covered
-medical conditions which arise during the initial period of the policy may not be covered

52
Q

Why is it good to use price comparison websites ?

A

-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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