Cash, Loans, Debts, and Promises

Cash, Loans, Debit, Promises: Lesson 4


  • In money terms, a loan is money you borrow from someone else, to be paid back with interest. You get a loan from a lender.
  • Interest is the amount the lender charges you to use their money, usually a percent of the amount you borrow.
  • The principal is the amount you actually borrowed.
  • Principal + interest adds up to the amount you must pay back.
  • When you get a loan, you agree to pay back a piece of the total each month until the whole amount is paid. Each payment is an installment.
  • The longer you take to repay the loan, the more interest you will pay.
  • If you don’t make payments on time, or stop paying altogether, you seriously harm your credit rating and will no longer be considered financially trustworthy in trying to get credit for other things, or renting a place to live, or getting a job.
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