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 from a current account that they do not actually have

Question 3

Hire Purchase

Answer 3

Allows individuals to use an item immediately and pay for it in instalments. The property is only owned by the individual when the final instalments have 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

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 a gap between the present moment in time and receiving a wage