8. The consumer credit boom CHECK YOUR ENGLISH VOCABULARY FOR BANKING AND FINANCE

CHECK YOUR ENGLISH VOCABULARY FOR BANKING AND FINANCE

8. The consumer credit boom

A. Read the article, and put these words into the spaces. credit rating creditors creditworthy into the red loans owe pay it back write off 1 The people of the United Kingdom are estimated to _____________ around a trillion pounds in personal debt, which is about £16,000 for every man, woman and child. Much of this debt is of course in the form of mortgages, but an ever-increasing proportion is in the form of consumer credit: unsecured _____________ in the form of overdrafts, credit card debts, store card debts, hire-purchase agreements and the numerous other ways in which the British public are able to “buy now, pay later”. 2 An inevitable result of this is that an increasing number of people are taking on more debt than they can service. Credit cards and store cards especially can have very high APRs*, and the interest soon mounts up, pushing the borrower further and further _____________. Repayment in full may simply become impossible. 3 Of particular concern are so called “loansharks”. While the major lenders such as banks _____________ millions of pounds every year in bad debts, small credit companies sometimes resort to heavy-handed measures such as sending in the bailiffs and even (although of course this is illegal) threatening physical violence. 4 Naturally, creditors try to avoid lending money to people who won’t be able to _____________. Although they may not know it, every person who has ever had dealings with a financial institution (for example, had a bank account) has a credit rating. This data is stored on computers by credit reference agencies, and before agreeing to a loan, most creditors will check the applicant’s _____________. However, this information can be misleading. Apparently _____________ people may already be struggling to keep up the payments on their existing debts. 5 As well as having potentially disastrous consequences for people who get too heavily into debt, the boom in consumer credit could have serious repercussions for lenders. If people are genuinely unable to repay their debts, ultimately there is very little their _____________ can do about it. *APR = Annual Percentage Rate B. Find words in the text which mean the same as the following. 1 Money owed by people, not businesses (paragraph 1) p____________ d____________ 2 Paying for something like a sofa or a car in instalments (paragraph 1) h____________-p____________ 3 Increases (paragraph 2) m____________ u____________ 4 …of all the money (paragraph 2) i____________ f____________ 5 Having problems (paragraph 4) s____________ 6 Maintain (paragraph 4) k____________ u____________ 7 Cause big problems (paragraph 5) h____________ s____________ r____________ B. Answer these questions in your own words. 1 What's the difference between a secured loan and an unsecured loan? 2 What's a bad debt? 3 What does a credit reference agency do? 4 What does a bailiff do? D. Match the phrases on the left with the alternatives on the right. 1 apply for a loan set up a loan take out a loan pay back a loan pay off a loan write off a loan a arrange a loan decide the borrower will never repay the loan get a loan repay the loan in instalments repay all the loan at once ask for a loan 2 b 3 c 4 d 5 e 6 f E. Which of the following sentences best summarises the article? 1 Creditors have lent too much money, and are starting to have serious problems. 2 British people love to "buy now, pay later", but the majority of them are not very creditworthy 3 Creditors are lending more and more money, and this is causing an increase in debt-related problems. 4 If more creditors used credit-reference agencies, there would be fewer debt-related problems.

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