Unit 2 Topic 7

Question 1

Citizens advice

Answer 1

A charity providing free, independent, confidential and impartial advice on citizens’ and consumers’ rights and responsibilities

Question 2

What type of loan is this describing?

A loan used to pay off a number of different debts, meaning that there is only one payment to make each month to the loan company.

Answer 2

Consolidation loan

Question 3

What is a debt management plan?

Answer 3

A detailed plan drawn up by a debt management company (DMC) and sent to an individual’s creditors. It sets out an affordable monthly payment shared between the creditors

Question 4

Electoral roll

Answer 4

A record of all citizens registered to vote

Question 5

What is this sentence describing?
Additional borrowing based on the difference between the value of a house and the outstanding mortgage

Answer 5

Equity withdrawal

Question 6

Exchange rate

Answer 6

The price of one currency in terms of another

Question 7

Define : Financial footprint
What might this include?

Answer 7

The record or ‘footprint’ that very financial transaction, and this very person, leaves behind them.

Missed payments
Loan applications
Increases in borrowing
Previous borrowing

Question 8

Define: MoneyHelper
What does it combine together

Answer 8

A consumer information service set up by the government to help people make informal financial decisions.

It is provided by the Money and Pensions Service and combines three older government services
the Money Advice Service
Pension Wise
Pensions Advisory Service

Question 9

Limited liability

Answer 9

When a person is liable for a company’s debts only up to the value of their investment

Question 10

Payday loan

Answer 10

A loan, designed to be taken out only for a very short period, which charges very high APR

Question 11

What is this sentence describing?
A benefit payable to people who need financial support because of disability or a long-term health problem. It has replaced Disability Living Allowance

Answer 11

Personal Independence Payment (PIP)

Question 12

Social security

Answer 12

Government provisions for people in need of financial assistance, i.e benefits

Question 13

Sole trader

Answer 13

A business owned and run by a single person

Question 14

What is this definition referring to?

A UK welfare benefit intended to replace the following six separate benefits: income-based Jobseeker’s Allowance, income based Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit, Housing Benefit.

Answer 14

Universal Credit

Question 15

Unsecured lending

Answer 15

Borrowing that is not secured against an asset

Question 16

Give an example of borrowing that is not secured against an asset

Answer 16

Personal loans
Credit cards
Overdrafts

Question 17

Name 3 life changing events that can cause financial problems

Answer 17

Divorce
Redundancy
Illness

Question 18

Name 4 variables that could change, effecting people either positively or negatively

Answer 18

Interest rates
Inflation rates
Exchange rates
Benefits

Question 19

Explain what is meant by a ‘spiral of debt’

Answer 19

Failure to repay the debt in any one month, carrying it over to the next month

Question 20

List ways in which a person could improve their credit rating

Answer 20

Keeping up to date with credit card payments
Set up direct debits for bills
Making loan applications one at a time
Dispute inaccuracies on credit reports

Question 21

List the things a prospective lender can see from a person’s financial footprint

Answer 21

Outstanding debts
Missed payments
Increasing borrowing
Previous borrowing
How many loan applications