Section A Types of borrowing

Question 1

2 dis advs of overdrafts

Answer 1

penalty charges can be very high

can encourage overspending due to ease of use and obtainment

Question 1

2 advs of overdrafts

Answer 1

interest only charged on amount borrowed

overdraft can be pre arranged asnd used to meet short term cash issues

Question 2

2 advs of personal loans

Answer 2

Budgeting is easier as payment plan is pre agreed - regular set payments

useful for saving for specifc item of medium value e.g car

Question 3

2 dis advs of personal loans

Answer 3

likely to be an unsecuted loan = very high interest rates

not suitable for everyone as a good credit rating and credit history is eligible

Question 4

2 advs of hrie purchase

Answer 4

spreads cost of expensive item over time

credit is secrued against item being purchased

Question 5

2 dis advs of hire purchase

Answer 5

fixed contract - if issues arise and miss payments - asset can be lost

likely to pay more for asset than cash due to interest

Question 6

2 advs of mortgages

Answer 6

enables one to spread cost of expensive item over long period of time

interest rates can be fixed or tracked against standard rate = reduced risk of fluctuations

Question 7

2 dis advs of mortgages

Answer 7

huge debt carried over a long period of time

Assest can be repossessed if payements are not made

Question 8

2 advs if credit cards

Answer 8

allows period of interest free credit - 1 month

provides some protection on purchases

Question 9

2 dis advs of credit cards

Answer 9

can encourage individuals to overspend

high interest rates if balance is not cleared

Question 10

2 advs of payday loans

Answer 10

fast source of cash in financial emergency

do not require good credit ratings = guarenteed eligibility

Question 11

2 dis advs of payday loans

Answer 11

loan for short period only

very high fees and interest on payments