BTEC Business Types of Borrowing
overdraft - correct answer Occurs when money is withdrawn from a bank account and the available
balance goes below zero
Arranged Overdraft - correct answer *Pre-agreed with your banks, will have a certain limit.
*Can use the money in an arranged overdraft with no penalties, beyond interest on repayments.
However, money needs to be repaid.
Unarranged overdraft - correct answer *Not agreed previously and incur a much higher interest rate
than an arranged as well as additional fees for each day you are over the limit.
Personal Loan - correct answer *Allows you to borrow a set amount of money, usually larger than an
overdraft.
*Bank sometimes may require some form of collateral, but this depends on your credit history and size
of loan.
*Repaid back in regular installments with interest added on.
Hire purchase - correct answer The buying of equipment by paying in installments, usually including
interest.
Allows you to have access to a product immediately and pay it off in installments.
Mortgage - correct answer A loan to purchase a home or other real estate
Credit Card - correct answer Type of card issued by a bank that allows users to finance a purchase.
Payday Loans - correct answer a relatively small amount of money lent at a high rate of interest on
the agreement that it will be repaid when the borrower receives their next paycheck.
overdraft - correct answer Occurs when money is withdrawn from a bank account and the available
balance goes below zero
Arranged Overdraft - correct answer *Pre-agreed with your banks, will have a certain limit.
*Can use the money in an arranged overdraft with no penalties, beyond interest on repayments.
However, money needs to be repaid.
Unarranged overdraft - correct answer *Not agreed previously and incur a much higher interest rate
than an arranged as well as additional fees for each day you are over the limit.
Personal Loan - correct answer *Allows you to borrow a set amount of money, usually larger than an
overdraft.
*Bank sometimes may require some form of collateral, but this depends on your credit history and size
of loan.
*Repaid back in regular installments with interest added on.
Hire purchase - correct answer The buying of equipment by paying in installments, usually including
interest.
Allows you to have access to a product immediately and pay it off in installments.
Mortgage - correct answer A loan to purchase a home or other real estate
Credit Card - correct answer Type of card issued by a bank that allows users to finance a purchase.
Payday Loans - correct answer a relatively small amount of money lent at a high rate of interest on
the agreement that it will be repaid when the borrower receives their next paycheck.
