Managing personal finance A4 Managing personal

Transcript:Managing personal finance A4 Managing personal:
Managing personal finance A4 Managing personal finance If you wanted to buy a car but didn’t have the money what other options are available to you? Managing personal finance In this topic you will learn about The suitability of different financial products and services against individual needs Different types of borrowing, features, advantages and disadvantages: Overdraft Personal loans Hire purchase Mortgages Credit cards Payday loans Different types of saving and investment features, advantages and disadvantages: Individual savings accounts (ISAs) Deposit and savings accounts Premium bonds Bonds and gilts Shares Pensions Risks and rewards of saving versus investment Different types of insurance products, features, advantages and disadvantages: Car Home and contents Life assurance and insurance Travel Pet Health Managing personal finance Suitability of different financial products and services will depend on a number of factors. Some of these include: Personal circumstances e.g. fixed or varying monthly take home pay Monthly amount that could be paid back Nature of the good or service to be funded Availability of an asset or guarantor to secure a loan against Credit rating Personal preferences Types of borrowing Overdraft An overdraft is the facility to overspend on a current account up to an agreed sum The individual in effect can withdraw money from the account that is not there meaning they go overdrawn or in the red Interest is charged on the overdrawn amount This is a good way to fund short-term cash shortages Borrowing is a way of funding a purchase now but paying for it over a period of time. Overdrafts can help with personal short-term financial shortages. But at what cost? Overdrafts Types of borrowing Personal loans A set amount of money provided, to an individual or couple, for a specific purpose, to be repaid with interest, over a set period of time May be secured against an asset and if there is a default on repayments the asset can be taken Financial institutions can vary interest rates depending upon the amount of risk placed on the loan Generally considered to be more suitable for buying more expensive items that will be paid for over a longer period of time Types of borrowing Hire purchase Spreading the cost of a purchase over a pre agreed period of time The consumer gets to have the item straight away and pays in monthly instalments The item technically remains owned by the seller until all instalments