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.
Today’s money mission
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.
What you need to know
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?
Real-life example
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.
Progress Penguin connection
In Progress Penguin, complete or review one practical action connected to “Total cost of borrowing.” Use this lesson objective: Explore why lenders advertise low monthly payments to make loans feel affordable. Record what you checked, the evidence you used, and your next step.
Activity preview
Try the money challenge
Compare the two options from this lesson and verify: lenders advertise low monthly payments to make loans feel affordable. Which demonstrates it most clearly over ten years, and why?
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?