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Borrowing guide

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Introduction

The point of this guide is to show you the different ways of borrowing and the advantages and disadvantages of each one. I will also give examples to help you understand. Borrowing is when you get or receive (something) on loan with the promise or understanding of returning it or its equivalent value. Borrowing is important because without it you wouldn't be able to afford it if you get into any money trouble. For example: if your business goes down hill and you have put your money in it and so you will lose everything when it shuts down. In this circumstance you would borrow money to help you get back on track. However in other circumstances you will have to control your urge to spend as it can have disastrous effects for example if your girlfriend wants some new shoes if you can't afford them don't buy them. TOP TIP!!! If you can't afford it, don't buy it!!!! To decide the best borrowing 'account' then you would have to decide how much risk and return you want. TOP TIP!!! The higher the risk the higher the return. For example if you put all your money into a business then you have a high risked chance of losing all the money. However if you have a share in a business then you will only be putting a small amount of money into something and also be able to carry on with your life quite normally. ...read more.

Middle

The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular instalments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. If you want a new television and you can't afford it then if you wanted the TV bad enough then you would take out a loan to pay for it if you can't afford it. (Not recommended. Just an example. :)) Abbey has a loan which: (tm) Is quick and easy to apply (tm) Get a decision in minuits (tm) Money caould be available within 24hrs Benefits from Abbey are: (tm) Great rates (7.9% APR) (tm) Borrow anything from �7,500 to �25,000 (tm) Pay it back from 1 to 8 years (tm) Repayments are fixed (tm) You don't have to be a current Abbey customer to apply. Advantages of loans are that when you need more money you can take out a loan and it will help you out. However the disadvantages of loans are that you can only take out a certain amount of money at a time and you have to pay more back than you have borrowed. This may get you into even more trouble if you can't pay it back. Credit Cards A credit card system is a type of retail transaction settlement and credit system, named after the small plastic card issued to users of the system. ...read more.

Conclusion

A real life example of this is when you want to buy a television and you can't afford it then you can go to Bright House and pay a certain amount a week to get the television. Advantages for hire purchase is that you can get something that you wouldn't normally be able to afford you can get and pay in sections A disadvantage of hire purchase is that you cannot sell the item until it has all been paid for. Another disadvantage is that the product never belongs to you until you have paid the firm back in full and hence if you miss a payment, the organisation can take the product back. Recommendations If you are buying a house the best type of borrowing is a mortgage. Also if you need to borrow money take out a loan as if you have a credit card then you will be more tempted to use it for things that you don't really need. If John wanted to borrow a few �1000 then he should take out a loan. This is the best way as if you get a credit card then you could go into more debt that you want to. With a loan you only have a certain amount of money that you can spend and you can't go over that rate unless you take out another loan which will get you even further into debt. You also could get an overdraft from your bank for this amount. ...read more.

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