types of borrowing pros and cons

over draft (pros)

• interest is only charged on the amount outstanding

• can be paid off without penalties

• provides a short term solution to cash flow problems

overdraft (cons)

• when used interest charges are often high 

• additinal penalty cheges for going over a pre-arranged limit are often very high 

• not the cheepest form of borrowing 

• the ease with wich these can be obtained could encorage overspending 

personal loans (pros)

• regular prearrange dpayments make planning and budgeting easy

• uesfull when looking to purchase a spesific item of medium to high value

personal loans (cons)

• may have to be secured against an asset wich means if payments are missed the asset may be taken to cover the outstanding debt

• not really sutible for short term loans

hire purchase (pros)

• spreads the cost of an expensive item over a period of time 

• credit is secured against a spesific item

• often allowes a customer to afford something now that they could not otherwise afford  

hire purchase (cons)

• intersest charges may be higher than other traditonal loans 

• ownership of the asset may legally be kept by the seller until the final payment is made 

• agreements can be manipulated to make a purchase seem deceptively appealing 

mortgages (pros)

• allowes the customer to spread the cost of expensive items over a period of time 

• interest rates apon the morgage deal, can sometimes be fixed or traced againsed a standard rate of interest reducing risk of fluctuations  

mortgages (cons)

• interest payments, although sometimes fixed for short periods of time, can vary - this seriously affects the borrowers ability to rep[ay or meet other expenses 

• failer to meet repayments may lead to a loss of a home and seriously effect affect an inderviduals credit rating 

credit cards (pros)

• can pay above the minimum rate they wish and hence speed up the rate of repayment and reduce interest incurred 

• can be used for items of multipe sizes and value to a limit, without the need to secure againsed an asset 

• provides some protection on purcheses 

credit cards (cons)

• can encorage overspending, sometimes on unnecessary purchases, and can lead todebt problems 

• interest rates are often higher than on a personal loan

payday loans (pros)

• help solve  immediet short term cash flow problems 

• realitvly easy to secure 

payday loans (cons)

• interest rates are very high and the cumulative amount to be repaid can quickly spiral out of control