Intro to Budgeting
The Cost of Borrowing Money
OK, so that’s the principal part of a loan. Now what should I know about the interest?
Interest is the amount of money above and beyond the principal that you pay back to the lender. It’s the cost of borrowing money.
Which of the following affects the interest rate on a loan?
The length of the loan
The type of the loan
The borrower’s credentials
All of the above
What is a variable interest rate?
A government incentive to encourage home ownership
An interest rate that stays the same over time
A payment timeframe that can change over time
An interest rate that can go up or down over time
Which of the following loans allows you to deduct the interest you pay from your federal taxes?
Home mortgage
Credit card
Car loan
Department store card