🎯 Goal: Understand debt, loan interest, and why bad debt is dangerous.
You understand borrowing means repaying principal plus loan interest (usually higher than savings interest), and "interest on interest" debt can balloon fast if unpaid.
Let’s explore
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When you borrow, you repay both principal and loan interest. Loan interest is usually higher than savings interest.
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Debt where “interest piles on interest” can balloon fast if unpaid — especially loan sharks.
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Borrowing with a plan and repaying on time is fine; borrowing to splurge and failing to repay is very dangerous.
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Why borrowing for fast-depreciating items hurts twice: Borrow 5M for a phone; after a year it is worth ~2M, but you still owe 5M + interest. The item’s value drops while the debt stays (plus interest) — that is the "double loss".
Practice activity
⚠️ Why is borrowing to buy something that loses value fast a risky choice?
Worked example: Borrow 5 million for the latest phone. After a year the phone is worth 2 million, but you still owe 5 million plus interest. Borrowing for something that loses value fast hurts you twice — a risky choice.
Quick quiz
1. When you borrow, you repay?
→ Both principal and interest
2. High-interest debt left unpaid will?
→ Balloon fast
3. Which kind of borrowing is dangerous?
→ High-interest loan sharks
4. Borrow 5M for a phone; a year later it is worth 2M but you owe 5M + interest — this is?
→ A double loss
5. Loan interest compared to savings interest is usually?
→ Higher
6. Loan sharks are dangerous because?
→ Very high interest, debt balloons
🎯 Real-life mission
Find the real interest rate of a consumer loan or installment plan.