1. 18 Credit: ways and places

2. Learning Objectives Compare and contrast the different methods of borrowing. Compare and contrast the different institutions which lend to borrowers.

3. Personal loan A loan of money you have received from somebody else. The term of the loan can vary but you will have to pay it back at some stage. The amount of the loan is called the principal. Main sources – friends, family, banks, finance companies and money lenders.

4. Interest Interest: The cost (in financial terms) of a loan. Interest rate: The interest, written as a percentage, payable for each year of the loan.

5. Other costs Lenders may add extra fees too like ‘setting up’ or ‘administration fees’. These can add up to more than the interest rate. Example 1 -

6. Chattel Mortgages Sometimes lenders will only lend you money if you give them the right to take something of yours (a chattel) and sell it if you don’t repay the loan. Eg. – secure a loan with your car.

7. Overdraft If you want to spend more money than is available in your cheque account, you will have to have an overdraft. You will only be allowed to overdraw your account if you have arranged it with your bank beforehand. Overdrafts are best when you are low of cash for a short period.

8. Hire purchase Stores selling bigger goods may encourage you to buy on Hire Purchase. Allows you to take the goods home even though you have not fully paid for them. The goods do not become your property until you have paid for them. Sign contract, pay interest, pay charges.

9. What happens if you don’t pay? Sent a notice giving you ten days to get up to date. Goods may be repossessed. Pay repossession fee. Lose deposit, payments and still owe money.

10. Store accounts and store cards. Issued to approved customers by a shop for use in that shop only. Conditions of use vary. Farmers, Hallensteins & Warehouse.

11. Credit Cards Issued by banks, retailers and independent credit card companies. Can be used in shops and to get cash. Has a limit and interest.

12. Mortgages Land or buildings are used as security. Usually between 20-30 years. Regular repayments. Small changes in the interest rates can affect your repayments. $100000 loan. Change from 7 to 9% would mean an extra $40 each week.