Personal Finance - types of borrowing

Question 1

Overdraft

Answer 1

Allows an individual to withdraw money from a current account that they do not actually have.

Question 2

Personal loan

Answer 2

Allows an individual to borrow a set amount of money which is to be repaid in regular instalments, with
interest.

Question 3

Hire Purchase

Answer 3

Allows an individual to have use of an item immediately but pay for it in regular instalments. The property
is only owned by the individual when the final instalment has been paid.

Question 4

Mortgage

Answer 4

A long-term loan to fund the purchase of assets e.g. property which will be repaid over a long period
e.g. 25 years.in time and receiving a wage.

Question 5

Credit cards

Answer 5

Allows an individual to pay for goods or services using a card with a statement issued at the end of each
month. The balance can be paid in full without incurring interest, or in smaller amounts with an interest
charge.

Question 6

Payday loan

Answer 6

A short-term source of finance that can help to bridge the gap between the present moment in time and
receiving a wage.