Loans — FinTeen

What it means

The Cambridge dictionary definition of loan is "An amount of money that is borrowed, often from a bank, and has to be paid back, usually together with an extra amount of money that you have to pay as a charge for borrowing" The charge for borrowing is called APR, which is total yearly cost of borrowing money.

Why it matters

Loans matter because they allow access to money that enable people to finance significant life events and let companies grow without giving ownership.

How to use it

You can get a loan if you have a stable monthly income. When you apply for a loan of for example €40K, you directly get the €40K. But you have to pay little by little so you pay €792 each month for 60 months. In exchange of the loan there will be interest, so by the time the 60 month term is complete you will have paid €47.520.

Real-Life Example

You want to buy a car worth €60.000, so you apply for a car loan. The bank says we have an APR of 7.5%, you choose to pay this money in 24 months so you paid €64.799. €4.799 is the money the bank gets for loaning you.

Did You Know?

Loans are as old as 4000 years. It began when farmers were borrowing money and re-paying it with their goods.

Key Takeaways

Loans are a tool to finance houses, cars, etc.

Know one question to ask before acting.

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