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Chapter 8 Borrowing
Key Terms in Chapter 8 Borrowing
| Question | Answer |
|---|---|
| Annual Percentage Rate (APR) | The Annual Percentage Rate (APR) is the cost you pay each year to borrow money |
| Asset | Assets are items of value that your business owns, creates or benefits from. Eg cash, raw materials and stock |
| Borrowing | Receiving money (a loan) from a financial institution that you must pay back with interest |
| Collateral | Collateral is an asset or piece of property that a borrower offers to a lender as security for a loan. |
| Cooling-off period | A cooling off period is a length of time during which the purchaser of goods or services has the right to cancel the purchase and obtain a refund. |
| Cost of credit | The cost of credit is the additional amount, over the amount borrowed, that the borrower has to pay. |
| Credit rating | A credit rating is an opinion of a particular business or person regarding the ability and willingness to fulfill its financial agreements within the date given |
| Creditworthiness | Creditworthiness is a lender's willingness to trust someone to pay their debts. |
| Declining principal | A declining principal is a decrease in the amount owed on a loan to provide financial relief for a borrower |
| guarantor | A guarantor is someone who agrees to pay your debt if you don't pay it. Guarantors pledge their own assets as collateral against the loans. |
| Hire purchase | With hire purchase you hire an item and pay an agreed amount in payments. You do not own the item until you have made the final payment. |
| Insolvency Service of Ireland (ISI) | Their objective is to restore insolvent persons to solvency. |
| Insolvent | A company is insolvent when it can't pay its debts. |
| Instalment | A partial payment on a purchase. |
| Interest | Interest is the amount of money a lender or financial institution receives for lending out money. |
| Irish Credit Bureau (ICB) | The Irish Credit Bureau (ICB) check your credit history and see your track record in repaying loans. |
| Leasing | A lease is an arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Eg Buildings |
| Matching principal | The matching principle states that an expense must be recorded in the same accounting period in which it was used to produce revenue. |
| Medium-term loan | Medium-term loans are loans with a repayment period between two and five years. |
| Money Advice and Budgeting Service (MABS) | The Money Advice and Budgeting Service (MABS) is a free and confidential service for people who are having problems with money management and debt. |
| Money lender | Money lending is lending money at interest to other people or business's |
| Mortgage | A legal agreement by which a bank lends money at interest to someone in exchange for taking title of the debtor's property |
| Responsible borrowing | Responsible borrowing is only borrowing for what you need. |
| Security | any proof of ownership or debt that has been assigned and may be sold |
| Stress test | Stress testing is a computer-simulated technique to analyze how banks fare in drastic economic scenarios. |
Created by:
mrfennell
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