Borrowing

• Identify one reason why a 'fixed interest rate' is a better option than a 'variable

  interest rate' when taking out a mortgage :

  • For a long-term mortgage such as 30 + years, fixed rates are better and offer more predictability.
  • Borrowers can plan for the future and can make sure they can afford the loan.
• why do people borrow money rather than use their own money

  • To buy something that it would take too long to save for (e.g. a house, car, holiday).
  • To pay for an unforeseen event (e.g. medical expenses) at a time when the cash is not available to cover it.
  • To pay for college (e.g. fees, accommodation, transport).
  • To start a business (e.g. new equipment, machinery, stock etc.).
• Collateral is something of value that the borrower promises to give to the lender in the event of non- payment of the loan.

  Examples: a car, or even a home.
• Factors to consider when deciding where to invest savings :

  • Interest rate on the savings account (how much she earns for depositing her money in the account)
  • Convenience of the savings account (how quickly she can access her money)
  • Taxation / charges (fees) on the account (DIRT)
• Where you can save your money

  Financial Institution 1: Bank

  Reason: because they have a range of savings accounts to suit her needs /

  banks are widely available across the country (when she moves away).