Lesson 4 of 5
Loans and Borrowing
🎯 In this lesson you'll learn:
- •Learn what a loan is
- •Understand interest on loans (you pay it back!)
- •Know when borrowing makes sense and when it doesn't
Aanya's Bike Loan
Aanya wants a bicycle that costs ₹5,000. She only has ₹3,000 saved.
"Can I borrow ₹2,000 from you?" she asks her dad.
"Sure! But remember, when you borrow money, you usually pay back a little extra. That extra is called interest — it's the cost of borrowing."
Her dad lends her ₹2,000 at 10% interest. After a year, Aanya pays back: ₹2,000 + ₹200 interest = ₹2,200.
The ₹200 is the price Aanya paid for borrowing the money. Banks do the same thing — but they charge MORE interest!
Good Debt vs Bad Debt
Not all borrowing is the same:
Good Debt ✅ • Education loan — helps you earn more later • Home loan — you need a place to live • Business loan — can help you earn money
Bad Debt ❌ • Borrowing to buy a phone you can't afford • Borrowing to play games or gamble • Borrowing to impress friends
The rule of thumb: If the loan helps you earn MORE money or learn a valuable skill, it might be good debt. If it's just for fun, it's probably bad debt.
India's Interest Rates
Here's what different loans cost in India:
• 🏠 Home loan: 8-9% per year • 🎓 Education loan: 10-12% per year • 🚗 Car loan: 8-10% per year • 💳 Credit card: 30-40% per year!
Credit cards are the MOST expensive way to borrow! That's why it's best to pay the full amount every month. Never just pay the minimum!
Quick Check
Score at least 60% to complete this lesson.