Loan Repayment Length and Interest Lesson
CEE Standard – Using Credit.
Let’s talk about how a longer loan repayment period and a higher interest rate can contribute to a larger amount of interest paid on a loan:
1. When a bank, credit union, or similar financial institution offers a loan, they will prescribe a repayment period and an interest rate.
2. These terms determine how much the borrower gives the bank as payment for the loan, and how long he or she has to pay it back.
3. The longer the repayment period on a loan and/or the higher the interest rate, the greater the total amount of interest charged.
Let’s look at some examples to illustrate how this works: