What we say
A loan is the act of giving an amount of money to a person (or a business) with the terms you must repay the amount plus interest. Interest is the extra money you’ll have to pay back on top of the amount borrowed. Interest is how banks and financial institutions make money!
What Caamp says (in their song, All the Debts I Owe):
"I'm barely fifty/Ain't comin' with me are all the debts I owe."
What we can learn about loans
Loans are great ways to financially float tough times, start businesses or invest in yourself. It can be great to loan, especially if you’ll earn interest and don’t have an immediate use for that money, but only if the lendee actually pays you back.
How you can use loans in your own life
The saying is true…sometimes it takes money to make money. If you don’t have the money on hand, you’ll have taken out a loan to get you where you want to be. Common types of these bad boys include student loans and mortgages.
The financial lessons
1. Think of a loan as a one-time credit card purchase. Someone is giving you money upfront that you’ll have to pay back with interest! So when the time comes to repay the loan, try to make the largest payments you can early to chip away at that debt. Depending on how big your loan is, paying an extra $20 per month could shave months or years off of how long you’ll have to make payments. You can calculate paying off loans early
2. Be sure to shop around for loans. Much like credit cards, there are many different types of loans with different interest rates and repayment terms. Government student loans often don’t have to be paid back until after you finish school, while private student loans and lines of credit demand you start paying them back immediately.
For school loans, there might be opportunities to have some of the loan forgiven – which means you don’t have to pay back a certain portion. Some states have college forgiveness programs. And some professions (like teachers and doctors) offer forgiveness for loans in return for working in certain locations or dedicating a certain amount of time to working for them after graduation.