Borrowing

    Cards (45)

    • Borrowing
      Getting money from a person or financial institution and agreeing to pay it back at a later date, with extra interest
    • Interest
      The financial cost for borrowing money
    • Questions to ask before borrowing
      • Do I really need the item?
      • How much will it cost?
      • Can I afford the repayments?
    • Reasons for household borrowing
      • To deal with short term deficits (e.g. Christmas)
      • For emergencies (e.g. break down, repairs, unexpected costs)
    • Asset
      Something of value that you own
    • Borrowing
      • Short term
      • Medium term
      • Long term
    • Short term borrowing
      • Budget deficit
    • Short term repayment period
      Repayment period within 1 yr
    • Short term sources of finance
      • Bank overdraft
      • Credit card
    • Medium term repayment period;
      Repayment period 1 to 5 yrs
    • Medium term borrowing
      • Purchase of a new car
    • Medium term sources of finance
      • Medium term loan
      • Hire purchase
      • Leasing
    • Long term repayment period
      Repayment period more than 5 yrs
    • Long term borrowing
      • Purchase of a house
    • Long term sources of finance
      • Mortgage
    • Hire purchase
      When you rent an item, and until the very last payment, it's theirs. After, it's yours. like a mortgage for things [ tv's etc]
    • Responsible borrowing
      responsible borrowing means do not borrow more than you are able to pay back
    • Credit card( short term sources of finance )
      Buy items now and pay for them at a later date, but interest rates can be very high, making it an expensive source of short-term finance. It is advised not to get a credit card.
    • Bank overdraft ( short term sources of finance)
      Account holder with a bank overdraft has permission to withdraw more money from their account than they actually have in it
    • Medium term loan( medium term sources of finance)
      Borrowers make fixed monthly repayments over an agreed time period. Plus interest.
    • Leasing( medium term sources of finance)
      Renting an asset (e.g. car, printer). Make fixed regular payments to the leasing company. You never own the asset.
    • Hire purchase (HP)(medium term sources of finance)
      Medium term source of finance used to purchase an asset. Agreed number of regular installments. Example: Harvey Norman TV.
    • Collateral
      Something used as security for repayments of a loan. If you cannot pay back the loan, the lender can take the asset such as your property.
    • Cooling off period (Hire purchase)

      The hirer has the right to withdraw from the agreement within 10 days of receiving a copy of the agreement.
    • Personal Contract Plans (PCP)

      A type of car financing where the car buyer only needs a relatively small deposit and the monthly repayments
    • PCP
      • Only financing part of the vehicle's cost
      • At the end of the agreed period (usually 3-5 years), the car buyer will not have paid the full purchase price of the vehicle
      • The car buyer has a number of options: pay the outstanding balance needed to buy the car outright, either from savings or by taking out a new loan, or return the car to the dealer
    • PCP appears attractive because car buyers only need a relatively small deposit and the monthly repayments
    • Personal contract plans (PCP)
      Car buyers only need a relatively small deposit and the monthly repayments are lower because they are only financing part of the vehicle's cost
    • At the end of the agreed period (usually 3-5 years)

      1. Car buyer has a number of options:
      2. Pay the outstanding balance needed to buy the car outright, either from savings or by taking out a new loan
      3. Return the car to the dealer
    • If the car is returned to the dealer, the car buyer may owe more money
    • Long-term loan/mortgage

      Long-term sources of finance for buying property
    • Mortgages
      • Available from commercial banks, building societies and some credit unions
      • Home used as collateral (security) for the loan
      • Lender can sell the property to recover money owed
    • Mortgage repayment periods
      15 and 30 years
    • Mortgage loan rates
      Lower than medium term loan rates
    • Moneylenders( Long term sources of finance)

      Individuals or companies (excluding banks, building societies and credit unions) whose main business is to lend money
    • Moneylenders
      • Charge up to 188% APR
      • Place borrowers under a lot of pressure to repay debts quickly
    • Questions to ask before borrowing
      • how much do I need to borrow?
      • what can I afford to repay back each week/month?
      • how long do I have to pay the money
      • where can I get the best rates of interest
    • Credit rating

      Credit worthiness checked by financial institution before granting a loan
    • Irish Credit Bureau (ICB)

      Credit rating agency in Ireland
    • Guarantor
      A person who agrees to be responsible for repaying the loan if you are unable or unwilling to do so