Risks and Benefits of Borrowing

In your groups, you will each select one of the following methods of borrowing to research. Answer each
of the questions so that your group members will be able to rank these methods because they have the
necessary information to make this decision.

Describe this Is there a cost to What is the What is the

method of borrowing money RISK? Benefit
borrowing this way?

Ex. -borrowing an -depends on the -If the loan is not -convenient

Friends or Family agreed upon agreement repaid this could because of more
amount of money -some friends or have a negative flexible repayment
from friends and family members effect on a terms
family and working may charge personal
together to decide interest relationship
when and how the
money will be
repaid

Personal Loan - With a personal - When you take - If you have a Consolidating and
loan, you agree to out a personal secured loan, your paying off
borrow a specific loan, lenders lender may be expensive credit
sum of money and frequently assess able to confiscate card debt with
repay it over time. interest at the time something you personal loans is
You are required of each planned own, such as your an excellent idea.
to repay the entire repayment, which automobile. If you
sum, plus interest is typically once skip a payment,
and any per month. As a your lender may
associated costs. result, your notify the credit
You accomplish monthly payment bureaus, which
this by paying actually consists of may reflect
recurring sums of two components: a negatively on your
money, or principal payment credit history and
instalments. toward your make it more
balance and an difficult for you to
interest payment. obtain credit in the
future.

Credit Card -A credit card is - Interest is often - Interest charges - Credit cards can
regarded as a assessed on an are typically be useful tools for
revolving loan, annual basis by charged on credit developing credit
meaning you can banks, credit card balances. when used
use it repeatedly unions, and credit You will be carefully, collecting
as long as you card firms. An required to pay an rewards when
keep making your average annual additional amount travelling, and
payments on time. interest rate for in interest for each managing
If your credit limit credit cards is 19 time you increase unexpected costs.
is $5,000 and you percent. According your balance and
used $1,000 this to the legislation, do not pay it off in
month and paid it you may be full within the
off in full, you'll charged up to $15 billing cycle. This
have access to the for every $100 that can make it
full $5,000 once you borrow from a challenging to pay
 more. payday lender. off credit card
debt.

OSAP - A loan is money - The difference - Your loan can be -OSAP provides
that you borrow between the prime turned over to a support in the form
and must pay it rate and the collection agency if of grants, which
back. You borrow Ontario rate is you don't pay back are like free funds.
money from the 2.45 percentage your OSAP. You A student loan is
Canadian and/or points. Your OSAP can therefore lose money you must
Ontario interest rate will be your eligibility for pay back once you
governments when an average of 2.75 future OSAP loans graduate.
you use OSAP. percent assuming and have your
With student that 70% of your income tax and
loans, you are loans are federal HST tax refund
exempt from and the remaining withheld.
paying the interest 30% are
that accumulates provincial.
while you are in
school. The
federal and
provincial
governments are
responsible for
paying it.

Federal Student - Federal student  The  The - Student loans

Loan loans come in government maximum give you the
three different can garnish loan money you need
varieties. The your salary amount is to start school
Federal Direct if you set by more quickly. Even
Loan Program is default on Congress, though you
how the your loan. so it might normally have to
government not be pay the money
provides all of  Defaulting enough to back, if you can
them. can also pay for all of earn more after
lead to the your finishing your
loss of other expenses. education, it might
sources of  If you fail to be simpler to do
income. ... make so.
 There is a payments
cap on how on your
much loan, the
money the federal
government government
can loan can take a
you. variety of
measures
to recover
its funds,
including
garnishing
your salary
and tax
returns.
 Line of Credit A line of credit is a Only the interest - If you carry a - the capacity to
type of borrowing on the borrowed large load on your borrow only what
option in which funds is due. You lines of credit, is necessary,
you submit a might have to pay which is typically avoiding big loans
single application fees in order to 30% or more of with high interest
for a credit limit use some credit your set line of rates
that you can use lines. You might credit limit, as you  Interest rate
again depending have to pay a would with credit is
on your credit registration or cards and other negotiable
needs. You only administrative revolving credit, it
pay interest on the cost, for instance. could have a
amount you negative influence
actually use. on your credit
score.

Based on the information your group has gathered, rank these methods of borrowing from best to worst.

#1 Friends or Family

#2 Credit Card

#3 Personally loan

#4 Federal Student Loan

#5 OSAP

#6 Line of credit