Session 6: Understanding debt and how to borrow wisely
In Session 4 you explored the first type of borrowing that many young people have direct experience of – the student loans used to finance further and higher education study.
In the video Bobby draws together the themes of the session. In this and the next session you’ll explore other types of borrowing that people use, including loans for cars and mortgages for property. You’ll look at the different types of lending institution too, including the ones to avoid!
The build-up of personal debt is a controversial subject. Some people unfortunately find they cannot afford to repay their debts – or, at least, cannot repay them on time. But for the vast majority of people, debts are manageable and the money borrowed is used to buy things that simply could not be afforded from savings.
In this session you look at what’s involved in borrowing (and repaying) money, at how interest rates work, at the financial institutions that are involved in setting rates, and at how debt can be used sensibly to support your goals and aspirations.
By the end of this session, you should be able to:
- understand who you can borrow from and what debt products are available
- know when borrowing is sensible and when it is reckless
- understand what determines the cost of borrowing money
- understand the ranking of debt products in terms of the interest rate charged.