What is Borrowing?

To get a grasp on a new to you financial concept, I recommend asking 3 questions:

  1. What does it mean?

  2. How does it work?

  3. How can it change my life?

So let's start with the definition answering the question "What does it mean?"

Borrowing is a temporary possession of money with the intent to repay the amount borrowed. In a financial sense, if you borrow money, you assume a debt to the lender, this debt contains the principal amount plus interest.

Time to break that definition down. We have two parties when we talk about borrowing - we have the person who needs money (borrower) and the person who has money (lender). When a borrower asks for money and is approved for an amount they sign a contract that states how much time they have to pay the lender back, but they have to pay the original amount they borrowed plus interest back to the lender.

there are two major ways lenders calculate interest simple interest and amortize interest - you can read more about the differences here.

To answer the question, "How does it work?" I recommend you watch the video below to talk you through a couple cases. In the video, I touch on what borrowing is definition wise, but I also talk through a couple more specific examples that will hopefully help shed light on this topic for you.

How can it change my life?

Money can't make you happy or make your relationship better, but money is a tool that when used properly, can help cut down debts which in turn may reduce some of the financial stress you feel.

I don't want you to continue a bad relationship with money - it's not something you should love or hate, but it is something you should learn to understand. Once you know how to use money, you have so many opportunities.

God Bless,

Denzel Rodriguez