Borrowing and Credit
Borrowing means taking money to be repaid later, usually with interest, and credit lets people buy now and pay later.
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Borrowing means taking money to be repaid later, usually with interest, and credit lets people buy now and pay later.
- Compare interest rates before borrowing
- Credit cards charge high interest
- Good credit records help future borrowing
🧠 Quick quiz
Three questions. Score 2 or more to complete the topic.
What is Borrowing and Credit?
Within Economics & Civics, which covers money, markets, business, government, law and citizenship: how societies are organised and run, this topic explains Borrowing and Credit. Economics and civics topics explain how money, markets, laws and government affect people, so each topic here pairs a clear definition with a model.
Check that you can explain Borrowing and Credit in your own words and give one example from everyday life. If you can do that, you have understood the core idea.
Understanding Borrowing and Credit helps you read the news critically and weigh up policies, choices and arguments about society.
Borrowing and Credit in detail
Borrowing means receiving money now and paying it back later, usually with interest. Forms of credit include loans, credit cards, overdrafts, mortgages (to buy property), hire purchase and buy-now-pay-later schemes. The cost of borrowing is shown as the APR (annual percentage rate), which allows comparison.
Credit can help to buy things you could not afford at once, such as a house or education, but late or missed payments bring extra charges and damage your credit score, making future borrowing harder. Payday loans have very high costs. Borrow only what you can afford to repay, read the terms and compare offers.
How the interactive helps you understand Borrowing and Credit
Watch the growth curve in the interactive. Use any sliders or buttons it offers to change the values and see how the growth curve responds.
Before you change anything, predict the result. Then change one value at a time and check whether your prediction was right. This is a quick way to build a correct mental model of Borrowing and Credit.
Real-life uses and examples
- Give a balanced answer about Borrowing and Credit by considering more than one point of view.
- Relate Borrowing and Credit to a news story about prices, jobs, elections or government spending.
- Use Borrowing and Credit to weigh up the pros and costs of a policy or decision.
Common mistakes to avoid
- Confusing a short-term effect with a long-term one.
- Giving an opinion without evidence or a clear economic or civic reason.
- Learning the definition without testing it. Use the quiz and the interactive to check that you can apply the idea.
Frequently asked questions about Borrowing and Credit
What is Borrowing and Credit?
Borrowing means taking money to be repaid later, usually with interest, and credit lets people buy now and pay later.
What are the most important points about Borrowing and Credit?
The main points are: Compare interest rates before borrowing; Credit cards charge high interest; Good credit records help future borrowing.
Why is Borrowing and Credit useful?
Understanding Borrowing and Credit helps you read the news critically and weigh up policies, choices and arguments about society.
How can I practise Borrowing and Credit?
Open the interactive at the top of this page and change the controls one at a time. Predict the result before each change, then take the three-question quiz. A score of two or more marks the topic as complete on this device.
Which topics are related to Borrowing and Credit?
Related topics in Economics & Civics include Taxes, Gross Domestic Product, Entrepreneurs.