Topic 4 Flashcards
(22 cards)
What is ‘overspending’?
When you spend more than your income.
What can ‘overspending’ cause?
Long-term financial problems.
What are the causes of financial difficulties?
- loss of employment
- insecure employment
- serious illness
- starting full-time education
- relationship problems
- overspending
What is an overdraft?
An overdraft can be a short-term solution to overspending. Using this facility for a month
or two can be very convenient and, as long as you pay it back quickly, it will not be too
expensive. A good habit to get into is to clear the overdraft as soon as you have the money
to do so – which means that it will be available again to use if you need it.
How does the interest rate of unauthorised overdrafts compare to that for authorised ones?
Since April 2020, the interest rate on unauthorised overdrafts cannot be higher than for
authorised overdrafts, so providers have raised the single interest rate they charge on
overdrafts.
What are the consequences for the failure to pay back debt?
Fines, and ultimately a lack of people willing to pay off debts.
What is the standards of lending practice, and what is it based on?
The basis by which banks can grant or refuse loans.
When is a person considered in financial difficulty?
When their wage is insufficient to cover their living costs.
How and why would a lender help the recipient of a loan?
In order not to lose money on the loan, they may increase repayment periods, or place one debt in one account to make it easier to process for the borrower.
What is the money charity?
The Money Charity is the UK’s financial capability charity. Its vision is for everyone to be
on top of their finances, to reduce stress and increase happiness. It offers educational
personal finance information and general advice online, and runs face-to-face workshops
and training for schools, colleges and adult community groups.
What is the Debt Advisory Centre?
The Debt Advisory Centre is a long-established company that helps with debt in the UK.
In contrast with other organisations we have discussed, the Debt Advisory Centre may
charge fees, but its debt solutions involve:
expert advice and suitable recommendation;
a personalised plan;
arranging everything for the debtor, eg dealing with lenders
What is the Step Change Debt Centre?
StepChange gives advice through both online and phone. It helps those in debt, for free.
How does the Step Change Debt Centre offer advice?
- Help the person to work out income, debts and household spending.
- Use this information to create a budget that suits the situation.
- Set up a debt solution and offer support for however long it is needed.
What is an IVA (Individual Voluntary Arrangement)?
An arrangement with creditors that will result in the payment of debts.
What is bankruptcy?
A legal procedure that clears debt, but that cannot remain private. Everyone will know about your financial difficulties.
What happens to your possessions when you go bankrupt?
You lose everything.
Can you get more credit when you’re bankrupt?
Not within the next year, and then only at high rates, as you’ll be deemed a “high risk customer.”
How long does bankruptcy stay on your record?
Six years.
What is a debt relief order?
A simpler form of bankruptcy for people that earn less than £20,000.
How long does a debt relief order stay on your credit record?
Six years.
When are debt relief orders appropriate?
When the recipient can’t pay debts under £20,000, and have under £1000 of assets, excluding a car. They also need less than £50 monthly surplus income, and no other bankruptcy.
What is the difference between a lender and a creditor?
A lender provides a mortgage, and a creditor everything else.
