Idea 22of 23Builds onA debt is paid back over time
Interest is the cost of borrowing
Why does borrowing money usually cost more than paying at once?
Today you'll discover
- what interest is
- how to find the total paid back
- how paying on time avoids it
Think firstDev borrows $200
Dev borrows $200 and must pay back $220. What did borrowing cost him?
Decide first, then press Next. Compare the long bar with the bar under it.
A bar for $200 borrowed. An orange piece, interest $20, is added to its end. A bracket under both: pay back $200 + $20 = $220. Below, a shorter bar for paying with money saved first: $200, and the sentence: borrowing costs $20 more, that is the interest. The last step shows an $80 loan with $8 interest.
See the whole ideathe big idea and the key word, in one place
The big idea
Interest is the extra paid for borrowing, so borrowed money costs more than paying at once.
Why lenders charge itWhile you have the lender's money, the lender cannot use it, so it charges interest. The longer a debt stays unpaid, the more interest is added.
Easy to get wrongInterest is added to what you owe, never taken off. A loan always costs at least what was borrowed.
Key word
- interest
- the extra money a lender charges for lending, added to what is owed
Ready to use it?
- Find the interest on a loan.
- Find the total paid back.