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Transcript of Personal Borrowing
How do we obtain goods ????
Buy goods on credit
Borrow the money
Rent the goods
Cannot buy on credit
Who can I borrow from ?
Applying for a loan
Complete a form
Meet with lender
Very important to know what information is required
Short/medium/long term loan
When consumers buy goods on credit they become the
immediate owners and pay later
- eircom/ESB give customers two months to pay their bill
- customer can obtain up to seven weeks' free credit using these cards
- a.k.a installment/rental purchase
Consumer pays a deposit
Pays remainder in installments
More expensive >>> interest is charged
Consumer becomes owner immediately
than hire purchase or deferred payments
Person can then
for cash, often getting a special reduction
To Borrow or Not Borrow ?
What should you think about before deciding to borrow?
Before deciding to borrow people should be sure that they:
Really need the goods
Cannot wait and save for it
Can afford to borrow
Have no alternatives
In order to be able to borrow a person must:
Be credit worthy
- satisfy the lender that they will repay
Have the ability to repay
- earn enough
Have a track record
- have an account with the lender
- security, taken if not repaid
On you own - Answer 'What do you think' sheet? (2 mins)
In pairs - Answer 'Think, pair, share' sheet (3 mins)
Be prepared to report back to the class !
0 to 5 years
Purchase of furniture, household repairs, holidays, weddings etc.
Two types ???
Obey proper lending agreements
Break the law by charging any amount of interest
Use bully tactics to enforce payment
Should be avoided
1. Name, and age of applicant
For lenders records and proof of age
To determine if applicant has a secure job
To determine applicant's ability to repay loan
4. Relationship with lender
Track record - previous dealings
5. Collateral available
To determine how secure the loan will be if borrower fails to make repayments
6. Amount required
To determine how much is being borrowed in relation to the total required
7. Other loan owning
To determine existing commitments and ability to repay another loan
8. Purpose of loan
Loans only given for certain things different rates of interest are charged for different things
9. Length of time required to repay the loan
To determine interest rate
Once off basis
A.k.a hiring or leasing
Do you ever own the good?
What do people rent?
Renting is very costly
Shouldn't be used by someone who needs the item on a regular basis
'Immediate use and eventual ownership'
Person gets to use the good while paying for it.
1. The Hire
2. The purchase
Obtain the use while paying for it.
Become the owner by paying the last instalment.
Person wants to buy a car, but doesn't have enough money !!
Hire purchase company agrees to pay the garage for the car.
Person pays HP company a deposit and pays remainder over a period of time.
Hire purchase price
Cash price + interest + other charges
Can be twice the cash price !!
Deposit = instalments will be less
They are owed less money
Rights when using HP
1. To receive a copy of the HP agreement - cash price, HP price and APR (annual percentage rate).
This should also have a description of the goods and how instalments are to be paid.
2. To return the goods to the HP company if instalments cannot be paid.
Goods must be in good condition and half the HP price must be paid.
3. If more than one third of the HP is paid - the HP company cannot take back the good without permission from the court.
Representatives from a HP company cannot enter a persons home without their permission or permission from the court.
The Borrower as a Consumer
People who borrow money are
consumers of money
An informed consumer knows:
1. The best place to borrow
2. Conditions attached to borrowing
3. Alternatives to borrowing
A borrow is a
. . . why?
Being a debtor brings certain
. . .
The borrower has the right to know:
2. Number of instalments
3. Amount of each instalment
4. Cash price
5. Total credit price
: If any of these rights are missing from a quotation in an advertisement for finance -
the law is being broken.
A borrower is responsible for:
1. Providing true and accurate information on the application form
2. repaying the amount borrowed in full and on time
Debtor doesn't pay up = declared bankrupt
If someone owes me even €1,900 I can go to the courts
That person will be publicly named . . . ?
Cost of borrowing
- Annual Percentage Rate
Lenders must show customers the APR
Takes into account all extra charges
Also takes into account the amount borrowed is reduced as repayments are being made !
As well as APR we have a
This is based on the
will be higher
Turn to page 98 in your books - examine the table
It's very important to file information on credit and borrowing
It is also very important to budget for borrowing.
You never know when you may need to pay for something unexpected.
Therefore you should always think of unexpected costs before borrowing.