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Chapter 11
Borrowing
| Question | Answer |
|---|---|
| Interest | The price we pay for borrowed money. |
| Security | Anything of value given by the borrowed to the lender in exchange for a loan. |
| Guarantor | A person who agrees to repay a loan for another person if they are unable to make their repayments. |
| Annual Percentage Rate (APR) | This is the actual rate of interest charged on a loan each year. It takes into account that the amount owed is going down each year as we repay the loan. |
| Term loan | A loan taken out for a fixed period of time, usually up to a maximum of five years. |
| Long-term loan/Mortgage | A loan taken out for a period of more than 5 years. These loans are taken out to help us to purchase something very expensive. |
| Bankrupt | A legal term used to describe a person or company that is unable to pay its debts. |
| Overdraft | Ask your bank for permission to withdraw more money than you have in your account. |
| Flat Rate | The flat rate of interest does not take into account that the amount we owe is going down each year as we repay the loan. |
| Credit Union Loan | The amount that can be borrowed usually depends on how much you have saved e.g. three times the amount in your account. |
| Moneylender | A person who gives a loan to another person who for one reason or another cannot borrow the money from a financial institution such as a bank. Loans from moneylenders usually have a very high rate of interest. |
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