Borrowing

Why do we borrow money?

Where can you borrow money from?

Advantages vs Disadvantages

This is Sunil….PERSONAL INFORMATION• 25 years old.• Very good job as a computer programmer.• Earns £2000 a month. • Spends £1900 a month on rent, food and other expenses.• How much money does he have spare a month?

He wants to buy a SatNav system for his car, which is £200.

What should he do?1. Buy it on his credit card, which has an APR of 10%.

2. Take out a loan from a bank, for the extra hundred that he needs. The loan has an APR of 6%.

This is Andrew….PERSONAL INFORMATION• He is 18 years old. • He is a student with a part-time job that pays him £40 a week. • He has about £5 a week left after he has paid his rent and bought food. • How much money does he have spare a month?

He wants to buy a new games console for £200.

What should he do?1. Save £5 a week until he has saved the £200 he needs. How long will it take?2. Buy it on credit from a games shop, which has an APR of 29.9%.

3. Put £20 a month into a saving scheme which gives him 5% interest each month.

This is Tolu….PERSONAL INFORMATION• She is 14 years old.• She gets £5 a week pocket money, which she can spend on whatever she likes.• She doesn’t spend much and at the end of the year usually has around £100 sitting around in her money jar.

What should she do with her £100?

What should she do?1. Put the £100 into a savings account, with an

simple interest rate of 5% for 2 years

2. Put the £100 into a savings account with a compound interest rate of 9% for 3 years.

This is John….PERSONAL INFORMATION• He is 24 years old. • He has a low-paid job and is always in debt. • He owes the bank £1000 but is struggling to pay it back.• His car has failed its MOT and he needs a new one.

The cheapest car he can find is £500, but the bank will not lend him any more money.

What should he do?1. Borrow the £500 from a loan shark, who charges an APR of 60%.2. Go to a different bank and get a loan for £500 on an APR of 15%.

This is Vijay….PERSONAL INFORMATION• She is 20 years old.• She has just started work as a trainee accountant. • Her wages are £80 a week, but this will go up a lot when she gets more qualified.

She wants to buy a car for £1000.

What should she do? 1. Get a car loan from the garage where she buys

the car. The APR is 12% for 3 years (compound interest)

2. Get a bank loan. The APR is 9.5% for 4 years (compound interest)

This is Carl….PERSONAL INFORMATION• He is 18 years old. • He is not very good with money, but he has just got a part-time job, which pays £20 a week. • He owes his mum £30 and his mate £10.• How much does he owe in total?

He wants to treat himself to some new £40 trainers when he gets his first pay packet at the end of the week.

What should he do?1. Save up for 2 weeks and buy the trainers.2. Pay off his mate and his mum first, and then save up for the trainers.3. Get a pay day loan for £80 with an interest rate of 48%

This is Emily….PERSONAL INFORMATION• She is 21 years old.• She works in a shop. • She has £100 a month left over after she has paid all her living costs. • She is not a big spender.

What should she do with her

left over money?

What should she do?1. Set up a regular savings account with an interest rate of 5%. Can get money out whenever she wants. 2. Set up a high-interest savings account with an interest rate of 8%. Have to leave the money in all year.3. Leave the money is her bank account in case she needs it. This has an interest rate of 3.5%.

This is Kim….PERSONAL INFORMATION• She is 18 years old.• She has just started as a college student.• Her rich Uncle has given her £10,000 to spend on “her future”.

She wants to invest some of the money on a new car. She plans to keep the car for 4 years.

What should she do? 1. Buy a car for £5,300 that will depreciate at a rate of 17% each year

2. Buy a car for £7,700 that will depreciate at a rate of 19% each year

3. Buy a car for £10,000 that will depreciate by 21.3% each year

Viv wants to invest £2000 for 3 years in the same bank.

At the end of 3 years, Viv wants to have as much money as possible.Which bank should she invest her £2000 in?

Plenary questionGCSE Grade B Higher tier question