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Borrowing

Debt & borrowing

Compare borrowing costs, repayment terms, and tradeoffs.

Intermediate · Ages 14+

Start with the idea

Borrowing can help pay for something now, but it creates an obligation to repay. The total cost can include interest and fees. Compare the amount borrowed, rate, fees, payment schedule, and total repayment. Terms vary by product; read the agreement and ask questions before deciding.

Key takeaways

  • Compare total cost (interest + fees), not just the monthly payment.
  • Paying only the minimum can stretch repayment out for years.
  • Paying more than the minimum reduces total interest.
  • Be cautious of high-cost loans such as some payday or title loans.

By the end you can…

  • Identify principal, interest, and fees
  • Compare total repayment in examples
  • Recognize questions to ask before borrowing

Source: CFPB, Ask CFPB and consumer education resources; consumerfinance.gov/ask-cfpb/.

Vocabulary flashcards

Card 1 of 5
Interactive tool

Debt payoff calculator

See how payment size changes payoff time and total interest.

Paying $60.00/mo

Payoff time4 years, 8 months
Total interest$1,328.83

Paying $100.00/mo

Payoff time2 years, 2 months
Total interest$579.75

Paying $40.00 more each month saves about $749.09 in interest and finishes 30 months sooner.

Assumes a fixed APR, no new charges, and no fees. Credit card minimum payments often change as the balance falls.

Check your understanding

Question 1 of 3

Two fictional loans have the same amount and term. Loan A has lower fees and a lower APR. What should a borrower do next?

Printable activity

Use this with the physical kit, in a group, or on your own.

  1. Compare two fictional borrowing offers using total repayment.
  2. Map how a payment is divided between balance and borrowing cost.
Try it this week: Use the payoff calculator to see how adding $25 to a monthly payment changes the payoff date.

Reflection: What would you want to know before making this choice in real life?

Practice questions

  1. Two fictional loans have the same amount and term. Loan A has lower fees and a lower APR. What should a borrower do next?
    • Compare the full terms and total repayment
    • Choose only by the monthly payment
    • Assume both loans cost the same
  2. A $1,000 card balance at 24% APR gets only a $25 monthly payment. What is most likely?
    • It is paid off in about 4 months
    • It takes years and costs hundreds in interest
    • No interest is charged
  3. Two loans have the same amount. Loan A: lower monthly payment, longer term. Loan B: higher payment, shorter term, same APR. Which usually costs less in total interest?
    • Loan A
    • Loan B
    • They always cost the same