Borrowing Flashcards
2 advantages of overdrafts
Interest only charged on what’s borrowed
Usually free to setup
2 disadvantages of overdrafts
(Creditor can call it in at anytime)
Interest is high
Penalty charges if you go over the predetermined amount agreed with the bank or if you have an unarranged overdraft
2 advantages of personal loans
Fixed interest rates allows easier budgeting
Monthly instalments allow you to spread the payment, helping to fund short-term cash shortages and plan expenditure
2 disadvantages of personal loans
Collateral given if loan is not repaid
Can be charged a penalty for early payment
2 advantages of hire purchase
Monthly instalments allow you to spread the payment, helping to fund short term cash shortages and plan expenditure
Allows you to buy an expensive item at an amount you can afford
2 disadvantages of hire purchase
Falling behind with payments can cause lender to repossess the car
Don’t own the item until all payments have been made, thus preventing you from selling or modifying the car
2 advantages of a mortgage
Fixed or tracked mortgage rates can help make payments more affordable
Allows you to buy your home and spread the cost over a long period
2 disadvantages of a mortgage
Interest rates may increase
Failure to repay can lead to property being repossessed
1 advantage of a credit card (borrowing)
Paying full amount each month
= no interest
1 disadvantage of a credit card
(Borrowing)
Interest charged on outstanding balance if you pay the minimum amount shown on the statement. Interest rates are higher than a personal loan.
2 advantages of a payday loan
Fast/easy access to cash
No collateral needed
2 disadvantages of payday loans
Expensive way to borrow due to high interest rates
Fee is charged when money is borrowed
