TOPIC 5 - THE COSTS OF BORROWING 5.2

TOPIC 5 - THE COSTS OF BORROWING 5.2

1. Borrowing leaves people with less left over from their future earnings until they have repaid their loans.

2. A borrower repays what was borrowed as well as a percentage interest charge on top of this.

3. Payday loans are very expensive unlike personal loans which are cheaper

   • Mortgages offer the lowest rates because they are secured on the property.

4. Losing your job or being faced with a large unexpected expenditure could affect your ability to repay a loan which is based off your future income.

5. Some people borrow more than they can afford to repay so they take out new loans to help them repay the old ones. this could get out of control if they are not careful or clever with it.

6. HARDCORE DEBT - is the amount of money that the borrower will never be able to pay off.

   • This kind of debt can cause serious psychological effects on the borrow and their relatives and friends. Because the borrower can worry and become stressed.

7. If the loan is secured on an asset like a home the borrower will lose that asset if they stop making repayments.

   • If the loan is unsecured then the defaulter will obtain a bad financial reputation. this will be harder to get credit again.