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Questions and Answers
What type of borrowing allows you to withdraw money that you do not have from a current account?
What type of borrowing allows you to withdraw money that you do not have from a current account?
Which borrowing option is typically used for purchasing a home?
Which borrowing option is typically used for purchasing a home?
What is a key characteristic of a hire purchase agreement?
What is a key characteristic of a hire purchase agreement?
Which type of loan is primarily designed for short-term financial gaps until the next paycheck?
Which type of loan is primarily designed for short-term financial gaps until the next paycheck?
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What is a distinguishing feature of using a credit card for purchases?
What is a distinguishing feature of using a credit card for purchases?
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Study Notes
Overdraft
- Allows you to withdraw money from your current account even if you don't have enough funds.
- Can be useful for short-term needs like a cash shortage before payday.
Personal loan
- Allows you to borrow a fixed amount of money for a specific purpose.
- Repayment is made in regular installments with interest.
- Suitable for funding high-priced items like a car or home improvements.
Hire purchase
- Allows you to use an item immediately while paying for it in installments.
- Ownership of the item remains with the seller until all installments are paid.
- Suitable for one-off or infrequent purchases like a TV or fridge freezer.
Mortgage
- A long-term loan used to finance the purchase of assets, typically paid over a long period (e.g., 25 years).
- Secured against an item like a house.
- Suitable for assets that retain value over time and cannot be paid for outright.
Credit card
- Payments for goods made with a card.
- Payment can be made at the end of a set period (typically a month) or gradually over time.
- Minimum monthly payments are a percentage of the credit card balance.
- Suitable for high-priced goods or services (like holidays), managing expenses during periods of higher spending (like Christmas), or as a convenient and safe alternative to cash.
Payday loan
- Short-term financing option used to bridge a gap between paychecks.
- Usually available for small amounts at very high interest rates.
- Suitable for emergencies and cash shortages.
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Description
This quiz explores various financial terms related to loans and credit, including overdrafts, personal loans, hire purchase agreements, mortgages, and credit cards. Gain a better understanding of how these financial tools work and their appropriate uses. Perfect for anyone looking to strengthen their financial literacy.
