Money: Video playlist

Personal Finance Products

Finlay wants to buy a new sofa, but he can’t afford to pay for it all in one go. As Finlay is over the age of 18, he could look at taking out a personal finance product.

Personal finance products are loans. A lender company pays for the product you want to buy upfront, and you pay them back later. The company makes money by charging interest to the buyer. This means you often pay back more than the item originally cost.

The sofa Finlay wants to buy costs £300. He has two finance options available.

Option A is £30 per month for 12 months. Option B is £22 per month for 18 months.

For option A, he pays £30 over 12 months. That’s 30 multiplied by 12, which is a total of £360.

Option B is £22 multiplied by 18 months. That’s £396.

Option B might be easier for Finlay to afford with lower payments each month, but it will cost him £36 more overall and £96 more than the original price of the sofa.

This is why it’s important for Finlay to compare finance options by asking: Can he afford the monthly payment? What’s the total cost with interest? And how long will he be paying for it?