LOANS Types of Borrowing There a number of

LOANS

Types of Borrowing There a number of different loans available from the financial institutions. The most suitable one to choose will depend on: l What you want money for l How long you want to borrow the money for

Loans can be divided into 3 types l l l Short Term Medium Term Long Term

Short Term Overdraft: Here you ask your bank for permission to overdraw your current account. This means that you get permission to withdraw (take out) more money than you have in your account. Overdrafts are used by people who are temporarily short of cash. l

Medium Term l Term Loan: A term loan is a loan taken out for a short period of time, usually up to a maximum of 5 years. They are available for a variety of purposes, such as new cars or college fees, and both the loan and interest must be paid back on a regular basis.

l Higher Purchase: This source is mainly used for the purchase of cars and expensive household items. It involves 3 parties; the buyer, the seller and the higher purchase company. The buyer gets immediate possession of the item but only gets ownership with the final instalment. Jane wants to buy a washing machine. Ganley’s of Athlone (Washing machine) HP company

Long Term Long-term loan/Mortgage: A long-term loan is usually for a period of more than 5 years. These loans are usually taken out to help us purchase something very expensive, such as a new house. The loan and the interest are paid back in equal amounts over the lifetime of the loan.

Credit Union Loan: Members of a credit union who have been saving regularly over a period of time may apply to a credit union for a loan. l The amount that can be borrowed usually depends on how much you have saved.

Moneylender: A moneylender is a person l l who gives a loan to a person who for one reason or another cannot borrow the money from a financial institution such as a bank. Loans from moneylenders usually have a very high rate of interest. Moneylenders must have a special licence to lend money.