What Is a Loan?
A loan is money you borrow and agree to pay back.
Common examples
A loan is a real financial commitment, not just free access to money.
What a loan normally involves
A loan usually has an amount borrowed, an interest rate, repayments, a repayment period, and possibly fees.
If interest and fees apply, the total repaid may be more than the $1,000 originally borrowed.
Now vs later
Borrowing lets people pay for something before they have enough money saved — but it creates a future obligation. See Trade-offs and Planning Ahead.
Being able to borrow money doesn't necessarily mean you can afford to repay it.
People need to consider whether repayments fit within their income and budget, not just whether they were approved to borrow.
Repaying $120
You borrow $120 and agree to repay $20 each month. Before considering interest, how many months would it take to repay?
$120 ÷ $20 = 6 months.
What could make the total repayment longer or more expensive?
Interest and fees added on top, or missing repayments and needing to catch up later.
Keep this educational rather than promotional. Children should come away understanding that borrowing is a real commitment, not a shortcut.
Where to next
More on credit cards and interest.