Business: Borrowing Money Flashcards
(23 cards)
What does borrowing mean?
Means getting money from a person or financial institution and agreeing to pay it back at a later stage.
What is interest?
Is the financial cost of borrowing money.
What questions should you ask before borrowing?
Do I really need the item? How much will it cost? Can I afford the repayments?
What is an asset?
Is something of value that you own.
What does responsible borrowing mean?
Means that you do not borrow more than you can pay back.
What is the matching principle?
Ensures that short-, medium- and long-term needs are matched with suitable short-, medium- and long-term sources of finance.
What are short-term sources of finance?
Bank Overdraft, Credit Card.
What is a bank overdraft?
A current account holder with a bank overdraft has permission to withdraw more money from their account than they actually have in it.
What is a credit card?
Cardholder can buy items now and pay for them at a later date.
What are medium-term sources of finance?
Medium-term loan, Leasing, Hire purchase.
What is a medium-term loan?
Repaid in 2-5 years.
What is leasing?
Renting an asset.
What is hire purchase?
Is when you pay for something in small parts over time and own it once all payments are done.
What are instalments?
Is a fixed sum of money due as one of a number of payments spread over an agreed period of time.
What is collateral?
Is something used as security for repayment of a loan, it can be sold by the lender and used to cover unpaid debt.
What is a Personal Contract Plan (PCP)?
Is a way to pay for a car in monthly payments, with the option to buy it at the end or return it.
What is long-term borrowing?
Households and individuals generally use a special long-term loan called a mortgage for buying property.
Who are moneylenders?
Are individuals or companies whose main business is to lend money, they are an expensive source of finance and some are unlicensed/illegal.
What is creditworthiness?
Is an estimate of a person’s ability to pay off a loan, based on their saving and borrowing history with financial institutions.
What is a guarantor?
Is a person who agrees to repay a loan for you should you be unable or unwilling to do so.
What does APR stand for?
Annual Percentage Rate is a calculation of the overall cost of a loan and represents the actual yearly cost of the amount borrowed.
What is the Money Advice and Budgeting Service (MABS)?
Is the state’s free and confidential money advice service.
What does insolvent mean?
Means being unable to pay your debts as they fall due.
