Term Definition
Interest Rate The price paid for borrowed money
Loan Money given to a person for a certain period of time in exchange for interest
Guarantor A person that agrees to repay a loan should the man or woman that withdrew the loan be unable to repay it
Overdraft When more money is withdrawn from an account than is in it
Collateral Security for a loan (such as deeds to a property) given to the lender until you pay back the loan
Mortgage A loan taking out to purchase property. The deeds of the property are handed over to the bank until the loan is repaid
Medium Term loan Usually taken out for between 1- 5 years. Often used for college fees, buying a new car etc.
Moneylender An individual that lends out money, usually to those that were refused by financial institutions, but at much higher interest rates
Deeds The documents that prove the ownership of property
Financial institutions that offer loans Commercial banks, credit unions, building societies
APR Often called true rate of interest, because it is based on the decreasing amount of the loan
Flat rate A collective percentage of the original loan
Factors I consider before borrowing: Can we meet repayments? Interest Rate? How long will the loan be? What collateral can I provide? Could I save the money up instead?
Factors the bank considers before lending: Does the person have a secure job? What is the loan for? What is their credit history? How much should we lend them? How long should the loan be for? What collateral is provided?
Credit union loan Members that save here can apply for a loan. The amount depends on how much saved
Rights of borrower: To know APR. To know the number of instalments, To know the cash vs credit price/
Responsibilities of borrower: Budget properly to afford repayments. Be truthful in loan application form. Use money for intended purpose
Leasing Renting an asset from a company for a period of time
Interest Price payed for borrowed money
Security Anything of value give to the lender in exchange for a loan
Example of security/collateral: Deeds of premises
Hire Purchase Buying goods on credit by paying an initial deposit and paying the balance owed by regular instalments over an agreed period of time. The buyer obtains the immediate use of the goods but does not become legal owner until the last instalment is paid.