Choosing to Borrow Money GCSE ECONOMICS: UNIT 11 Choosing to Borrow Money Mr Tarn

Aims of today’s lesson … Understand why people borrow Understand methods of borrowing money Understand the impact of changing interest rates

How do you feel about borrowing? Lets see how other people view borrowing….

What would you borrow money for? Lets see what other people would borrow money to buy….

Case Study: Why Borrow Money There are times in our lives when we need to buy something but may not have the cash to pay for it there and then At times like that we may decide to borrow the money   Meet Becky who is hoping to buy a car You are going to help her consider her options When completing the case study options task students will need to consider the following for each option; The time for repayment Any requirements legal or otherwise for borrowing the money The likely interest paid on top of the money borrowed Any risk involved (i.e. for non-repayment)

The impact of interest rates on Borrowing/saving money… The bank’s interest rate is the PRICE or COST of borrowing money AND the REWARD for saving money For example you might borrow £1,000 from a bank… …however, they will not give you the money for free you will have to repay the £1,000 plus interest If you put money into a bank you will gain interest as a ‘thank you’ for saving your money with them

The impact of changing interest rates on Borrowing/saving money… Banks and building societies regularly change their interest rates A change will have a major impact upon consumers, savers, borrowers, homeowners and businesses What would be the impact on homeowners who have a mortgage if the interest rate were to increase? A. If they have a variable rate mortgage their repayments with change directly with the interest rate set by the bank; therefore a rise in interest rates will increase repayments, meaning they have less disposable income!

“Choosing to borrow money” Over to you... Open and compete the document called... “Choosing to borrow money”