Total cost of borrowing
Explore why lenders advertise low monthly payments to make loans feel affordable.
In this lesson
Total cost of borrowing is part of Interest Costs Borrowers. This preview shows how interest-growth connects to everyday family decisions such as earning, saving, spending choices, goals, approvals, or parent-guided money conversations inside Progress Penguin.
Think about this money choice
Imagine this situation: A phone costs 80000 in local currency to buy outright. A buy-now-pay-later scheme offers 6 monthly payments of 16000 in local currency.
How it works
Lenders advertise low monthly payments to make loans feel affordable. But 3 years of small payments on a high-interest loan can cost twice the item's price. Always ask: what is the total amount repaid?
Apply it to a real decision
Real-life money moment: You can buy a 200000 in local currency laptop: Option A — save for 10 months at 20000 in local currency/month. Option B — buy now on credit at 24000 in local currency/month for 10 months. What is the total extra cost of Option B? — Option A: 20,000×10=200,000. Option B: 24,000×10=240,000. Extra cost: 40,000. That 40,000 is the price of impatience — the cost of having the laptop 10 months before you could afford it.
Activity preview
Apply the idea
Use the lesson to complete this short practice activity.
Quiz preview
Before borrowing, calculate:
A phone costs 80000 in local currency to buy outright. A buy-now-pay-later scheme offers 6 monthly payments of 16000 in local currency. What is the total cost and the extra you pay for the convenience?