Their debt problems started with the downturn in the economy. Aaron lost his job in a local pharmaceutical factory and Lisa’s salary was cut by 10%. At this stage, they started to use their credit cards to pay household bills, such as groceries and electricity. It wasn’t long before they reached their credit limit on these cards and could not make payments.
Lisa and Aaron are both worried sick about the future for themselves and their young family.
1. Which financial service providers do Lisa and Aaron have personal loans with? 2. What does the term Celtic Tiger refer to? 3. How does the way Lisa and Aaron use their credit cards change?
People in debt can also seek advice from independent services. One such option is the Money Advice and Budgeting Service (MABS), who provide a free service for people in debt.
CHAPTER SUMMARY • Borrowing is getting a sum of money from a financial institution which must be paid back plus interest.
• A loan is a sum of money that is borrowed from a financial institution and then paid back in instalments.
• Collateral is something of value that the borrower promises to give to the lender in the event of non- payment of the loan.
• A guarantor is a person (e.g. a parent or guardian) who agrees to pay the loan if the applicant is unable to pay.
• A mortgage is a loan to buy a house or other property. It is repaid in instalments, plus interest, over a long period of time.
• Annual Percentage Rate (APR) is the annual rate charged on a loan. Interest is only charged on the balance yet to be paid.
• Hire purchase (HP) allows a person to use goods while they are paying them off. • Leasing allows a person to use goods for a period of time without ever owning them. • A debt is a sum of money that is owed or overdue.
Taking stock A
Go to page 64 in your Activities and Accounts Book to check what you have learned in chapter 8.
