Types of borrowing

Question 1

credit cards

Answer 1

goods are paid for by a card and can be repaid for a set period.
provides protection on services and can be used to a limit but can encourage overspending and interest can be high

Question 2

overdraft

Answer 2

allows you to withdraw money you do not have.
can be paid off without penalties and interest is only charged on the amount outstanding but it isnt the cheapest form of borrowing

Question 3

personal loans

Answer 3

gives you ability to borrow a set amount of money.

regular payments make budgeting easier but may be secured over an asset and interest may be high

Question 4

hire purchase

Answer 4

allows you to have use of an item immediately but pay in regular instalments.
spreads the cost over time but interest may be high and ownership of an asset may legally be kept by seller until final payment

Question 5

mortgages

Answer 5

long term loan to fund the purchase of an asset.

allows customer to spread expensive costs over time but penalties may be applied to an early repayment

Question 6

payday loans

Answer 6

short term source of finance to bridge the gap between now and payday
easy to secure and help solve immediate cash flow problems but interest can be high