Personal Finance Flashcards
What is overdraft?
an overdraft occurs when money is withdrawn from a bank account and the available balance goes to zero
overdraft advantage
can change the amount borrowed
no charge if you pay it off early
credit score could go up if payed early
overdraft disadvantage
interest is high
banks can change limits at anytime
cannot be used with large amounts borrowed
Payday Loan
a small amount of money lent on the agreement that it will be repaid when the borrower receives their next wages
Payday Loan advantage
easy to access
they don’t check your credit score
Payday Loan disadvantage
very high interest
expensive
what is a mortgage?
a legal agreement by which a banks lends money at interest in exchange for taking title of the debtor’s property
mortgage advantage
spread the payments out
manageable and affordable
mortgage disadvantage
carrying debt for long time
remember to keep paying your repayments
what is a personal loan?
are a loan that a bank or other lenders makes that are not secured against any asset such as your home
personal loan advantage
easy to obtain
improves credit score
personal loan disadvantage
get into a debt cycle
high interest rates
what are hire purchases?
an agreement whereby a customer agrees to a contract to acquire an asset by paying for a set period of time
hire purchase advantage
high spec assets
low interest on other funding costs
hire purchase disadvantage
dead money
at the end you don’t own the product
