Borrowing is Not Free
01.Paying for the Privilege
Whenever you borrow money—whether it's from a bank, a credit card company, or a car dealership—you have to pay for the privilege of using someone else's money. This cost is called borrowing interest.
02.How Loans Work
When you get a loan (like a student loan for college or a mortgage for a house), the lender gives you a big chunk of money. You agree to pay it back in small monthly payments over several years, plus interest. Over time, the interest can add up to thousands of extra dollars!
03.The Cost of Waiting
If you buy a $1,000 computer on a credit card and only make the minimum payments, the interest fees will pile up. You might end up paying $1,500 for that computer by the time you're done! That is why saving up and paying cash is almost always cheaper.