Have you ever needed to buy something, but unfortunately you didn't have enough money on hand? How did you handle the situation? Did you end up not buying the item at all or did you ask your parents if they would give you some money?
While it is nice to just have someone give you money, there is another option - you can borrow money. However, when you choose to borrow money, you are also promising to pay that money back eventually. In the grown-up world, we call this a "Loan". Below are some terms to help you better understand the "Borrowing (Lending)" process.
To receive money that you plan to pay back.
The actual money that you borrow.
Money that you pay back to lender.
The person or organization that lends you the money, which you have promised to pay back.
Making A Payment Plan
When you borrow money from someone, you should have a written out plan so that both you (borrower) and the lender have a clear understanding about your agreement. Your written out plan should include:
1. The total amount of money you are borrowing.
2. The period of time in which you plan to pay back the total amount borrowed (ex. 12 months).
3. How often will you make payments?
4. What amount of money will each payment be?
No matter what you and your lender have agreed on, make sure you fulfill
your promise and pay all the borrowed money back in the time period, to which
you agreed. Failing to do so will damage your reputation with that lender and you
might have trouble getting someone to lend you money for future events.