Borrowing

Borrowing

Getting a sum of money from a financial institution which must be paid back with interest.

Loan

A sum of money borrowed from a financial institution and paid back in instalments/interest.

Short term loan

Paid back in less than a year.

Credit cards (buy now pay later)

A card that gives the holder the option to pay for goods and services and borrowing money up to an agreed limit. E.g. Mastercard

Overdraft (STL)

Permission to withdraw more money from a current account than the agreed limit.

Medium term loan

Paid back to the lender in instalment over 1-5yrs. Paid back with interest. E.g. Buying a car

Long-term loan

Repaid over more than 5yrs in instalments with interest. E.g. Buying a house

Mortgage

A long-term loan used for buying a house or other property. Repaid in instalments over a long period of time with interest. Home used as collateral.

Collateral

Something valuable that the borrower promises to give to the lender in the event of non-payment of the loan.

Guarantor

A person of good financial standing who agrees to pay the loan if the applicant can’t.

Hire Purchase (MTL)

Allows a person to use a product while they’re paying it off. Deposit paid, followed by instalments over a set period of time. Only own the item when the last instalment is paid. E.g. cars

Hiring, leasing, renting

Using goods for a period of time without ever owning them. Allows someone to use something they might not be able to afford. If leased for a long time may end up paying more than its worth.

Annual Percentage Rate

The annual rate charged on a loan. Interest only charged on the balance yet to be paid.

Money-lenders

Must have a licence to lend money. Given for a short period of time. Very high interest.

Debt

A sum of money that is owed or overdue.