Different types of borrowing:

DIFFERENT TYPES OF BORROWING:

Overdraft: This allows you to withdraw money that you do not have from a current account.

Advantages:

Can be paid off without penalties.

The short-term solution for cash flow problems.

Interest is charged only an amount.

Disadvantages:

Interest charges are often high.

Additional penalty charges.

It is not the cheapest form of borrowing.

Personal Loan: This gives you the ability to borrow a set amount of money, normally for a specific purpose, to be repaid in regular instalments with interests.

Advantages:

Regular, pre-agreed payments make planning and budgeting easier.

As the general rate, these will be issued to those that can prove their ability.

Disadvantages:

May have several that are against the asset which means if the payments have been misused then the asset may need to be taken over to cover the outstanding deadline.

Not really suitable for short-term loans.

Hire Purchase: This allows you to have use of an item immediately but pay for it in regular instalments…