Borrowing

1

100

Define borrowing 

Borrowing is when you take money from someone, like a bank, and promise to pay it back later, usually with extra money called interest.

200

Describe two reasons for borrowing money and give examples

1. To start a business

2. To make an expensive purchase that they cannot afford from their savings 

3. To help them through an expensive time 

4. To make an investment that will hopefully make a profit

300

What timeframe applies to each type of borrowing (long/ medium/ short)?

Short - Less than 1 year 

Medium - Between 1 and 5 years 

Long - Over 5 years 

400

What is the other word for security and explain it's meaning 

Collateral 

An asset or guarantee provided by the borrower to the lender as collateral to reduce the risk of non-repayment.

500

Outline one reason why low interest rates encourage borrowing

Lower interest rates = cheaper to repay the loan

2

100

What type of borrowing is a Hire Purchase? (long/ medium/ short)

Give an example. 

Medium-term borrowing

200

Identify 3 financial institutions where you can go to borrow money.

1. Commercial Bank 

2. An Post 

3. Credit Union 

300

Explain briefly what is meant by a bank overdraft

When a bank gives you permission to take out more money from the account than what is currently in there. 

400

State the 3 parties involved in a Hire Purchase agreement 

1. Buyer 

2. Seller 

3. Financial Institution 

500

Jeff wants to build a large extension to his business premises. Name a suitable source of finance. 

Long term loan/ grant

3

100

What does APR stand for 

Annual Percentage Rate 

200

List 3 types of short-term borrowing.

1. Bank Overdraft

2. Credit Card 

3. Moneylender 

300

1 similarity and 1 difference between paying rent and paying a mortgage. 

Similarity - You use the asset

Difference - You own the asset in the end with a mortgage and you never own the asset when paying rent. 

400

What source of finance should be used to purchase a car?

Hire Purchase/ Medium Term Loan 

500

How is the Flat Rate of interest calculated? 

P x R x T (Price x Rate x Time) 

4

100

What is the extra money that you borrow referred to as?

A loan 

200

Explain a mortgage 

- A type of long term borrowing

- Takes more than 5 years to repay 

- Used to purchase a house 

300

A loan from this person will carry a very high rate of interest

Moneylender 

400

True Rate of interest is another name for what type of interest?

APR 

500

In addition to loan repayments, outline two other expenses of running a car. 

1. Insurance 

2. Motor tax

3. NCT

4. Diesel/ petrol

5. Regular servicing 

5

100

Define Interest 

The financial cost of borrowing money. 

200

List 3 types of medium-term borrowing 

1. Term/ Personal loan

2. Hire Purchase

3. Renting 

300

Explain common bond

A common bond in a credit union is the shared connection among its members, such as living in the same area. 

400

List 2 rights when you borrow money 

You must be told...

1. The APR of interest 

2. The total cost of the loan 

3. The total number of payments 

4. You have the right to cancel the loan within 14 days of signing the loan

500

Explain the difference between Flat Rate of Interest and APR.

The flat rate of interest is calculated on the original loan amount for the entire term, while APR (Annual Percentage Rate) includes interest plus fees, giving the true cost of borrowing.