Bank loan
Okay kiddo, A bank loan is kind of like borrowing money from a friend, except instead of asking your friend for money, you ask a bank for money. When you borrow money from the bank, you have to pay back the money you borrowed plus some extra money called interest.
Imagine you want to buy a toy that costs $10 but you only have $5. You can go to the bank and ask if they can lend you the $5 you need to buy the toy. If the bank says yes, they will give you $5, but you have to promise to pay them back the $5 you borrowed plus some extra money called interest, which might be an extra $1.
Next time you get your allowance, you might give $1 of your allowance to the bank until you have paid back the $5 you borrowed plus the $1 in interest. So in total, you will have to pay the bank $6.
Banks usually lend people money to buy things like houses or cars or to start a business. But just like any other type of borrowing, it comes with a responsibility to pay it back, and it is important to understand the terms and conditions of the loan.
Imagine you want to buy a toy that costs $10 but you only have $5. You can go to the bank and ask if they can lend you the $5 you need to buy the toy. If the bank says yes, they will give you $5, but you have to promise to pay them back the $5 you borrowed plus some extra money called interest, which might be an extra $1.
Next time you get your allowance, you might give $1 of your allowance to the bank until you have paid back the $5 you borrowed plus the $1 in interest. So in total, you will have to pay the bank $6.
Banks usually lend people money to buy things like houses or cars or to start a business. But just like any other type of borrowing, it comes with a responsibility to pay it back, and it is important to understand the terms and conditions of the loan.
Related topics others have asked about: