Repossession means that the bank takes over full legal ownership of a property. The former owners have to leave the property and the bank sells it to repay the mortgage debt.
Key Concepts
1. A loan is described as having an APR of 8%. Explain what this means. 2. (a) What is credit? (b) Joe is described as having a ‘low credit risk’. Explain what this means.
3. List three short-term sources of finance. 4. (a) Explain how credit cards work. (b) Identify one advantage and one disadvantage of using credit cards. (c) Explain the difference between a credit card and a debit card.
5. Outline what is meant by a bank overdraft. 6. List three medium-term sources of finance.
Critical Thinking Skills
1. Joe wants to buy a car. He is considering taking out a term loan or buying on hire purchase. Explain to Joe the difference between these two sources of finance. Which would you recommend to him?
2. Mary wants to buy a house and is thinking about getting a bank loan. Advise Mary on the type of bank loan she should be looking for.
3. Decide whether the following statements are True or False. (a) Electricity is purchased on credit.
(b) The APR tells consumers what the true rate of interest is on a loan.
True False
q q q q
(c) Credit purchasing means paying now but taking delivery later. q q (d) Store cards are the same as charge cards. (e) Term loans are a short-term source of finance. (f) Mortgages are a long-term source of finance. (g) Leasing is effectively the same as renting. (h) Moneylenders charge very low rates of interest.
