Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Chapter 08
Borrowing for Individuals and Households
| Question | Answer |
|---|---|
| Borrowing def | Getting money from a person or a financial institution and agreeing to pay it back at a later date + interest |
| Interest def | Financial cost of borrowing |
| Questions to ask before borrowing | Do I really need the item? How much will it cost? Can I afford the repayments? |
| Reasons for borrowing | Pay for expensive items Deal with short term deficits For emergencies |
| Short-term need example and repayment period | Budget deficit, within one year |
| Medium-term need example and repayment period | Purchase of a new car, one to five years |
| Long-term need example and repayment period | Purchase of a new house, more than five years |
| Short term sources of finance | Bank overdraft (allows for account holders to withdraw more money than they have in the account) Credit card |
| Medium term sources of finance | Medium term loan Leasing (renting item and make fixed repayments) Hire purchase (pay deposit followed by agreed number of repayments) |
| Long term sources of finance | Mortgage |
| Instalment def | Fixed sum of money due as one of a number of payments spread overtime |
| Collateral def | Security for repayment of a loan |
| PCP def | Personal Contract Plans: small deposit, low monthly instalments |
| Moneylenders def | Individuals/businesses that mainly lend money |
| Where to apply for a loan | Commercial banks Credit unions Building societies |
| Steps to applying for a loan | 1. Personal details 2. Residential details 3. Employment details 4. Savings records 5. Borrowing history 6. Purpose of the loan |
| Creditworthiness def | Estimate of a persons ability to pay off a loan based on savings and borrowing history |
| Guarantor def | Person who agrees to repay a loan for you should you be unable/unwilling to do so |
| Stress test def | Test to see clients ability to repay proposed loan |
| APR def | Annual Percentage Rate: calculation of the overall cost of a loan |
| Cost of credit def | Real cost of borrowing. Difference between amount borrowed and amount you need to repay |
| 3 rights of borrowers | Written document of agreement Cooling off period for 10 days Informed of APP |
| 3 risks of borrowing | May lose item as collateral May be fined Creditworthiness affected |
| MABS def | Money Advice and Budget Service |
| ISI def | Insolvency Service of Ireland |
Created by:
TomDel123
Popular Business sets