Choosing to Borrow Money

1. GCSE ECONOMICS: UNIT 11 Choosing to Borrow Money Mr Tarn

2. Aims of today’s lesson … • Understand why people borrow • Understand methods of borrowing money • Understand the impact of changing interest rates

3. How do you feel about borrowing? • Lets see how other people view borrowing….

4. What would you borrow money for? • Lets see what other people would borrow money to buy….

5. Case Study: Why Borrow Money • There are times in our lives when we need to buy something but may not have the cash to pay for it there and then • At times like that we may decide to borrow the money • Meet Becky who is hoping to buy a car • You are going to help her consider her options

6. The impact of interest rates on Borrowing/saving money… • The bank’s interest rate is the PRICE or COST of borrowing money AND the REWARD for saving money For example you might borrow £1,000 from a bank… …however, they will not give you the money for free you will have to repay the £1,000 plus interest If you put money into a bank you will gain interest as a ‘thank you’ for saving your money with them

7. The impact of changing interest rates on Borrowing/saving money… • Banks and building societies regularly change their interest rates • A change will have a major impact upon consumers, savers, borrowers, homeowners and businesses • What would be the impact on homeowners who have a mortgage if the interest rate were to increase? A. If they have a variable rate mortgage their repayments with change directly with the interest rate set by the bank; therefore a rise in interest rates will increase repayments, meaning they have less disposable income!

8. Over to you... • Open and compete the document called... “Choosing to borrow money”