Kids & Money - A Newsletter for Youth North Dakota State University
NDSU Extension Service

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Loans

Loan Language

Have you ever wished for something that cost more money than you could pay? You may have wished to charge it or borrow money. Adults do that when they need something that costs a lot.

Let’s pretend you can borrow money or get a loan. You get a loan from a LENDER to buy your first car. You, the BORROWER, will have to sign a paper that says you promise to pay back the money by a certain time. You can do it either in small TIME PAYMENTS or one big payment. The lenders also will charge you some money for letting you use their money. This is called INTEREST. It makes your car cost more.

LENDERS also may have you promise to give them something valuable that you own if you don’t pay back the money you borrowed.

Often this is the thing you bought with the borrowed money. This thing is called COLLATERAL. A lender can REPOSSESS or make you give back the collateral. For example, you may have to give the lender your car if you don’t make your loan payments. Lenders also get to keep the money you’ve already paid toward the car’s purchase. Not making payments is called DEFAULTING on your loan. If you do this, you will have a bad CREDIT RATING and many lenders won’t give you another loan. Too bad. You will have to ride your bike or walk!


Credit Language

Can you match each word with its meaning?

Time Payment, Borrow, Defaulting, Interest, Repossess, Loan, Collateral, Lender, Good Credit, Borrower

a) The cost of using or borrowing money.
b) Money or property given to a person who agrees to give it back by a certain time.
c) Paying a loan in small parts on a schedule.
d) You have this if you pay back loans as agreed.
e) The property that you promise to give the lender if you can't pay back the loan.
f) The person who gets money.
g) The person who furnishes money.
h) Not paying your loan.
i) Taking the property that was promised when the loan is not repaid on time.
j) To use someone else's money or property for a time.


Answers: Credit Language: (Time payment-c), (Borrow-j), (Defaulting-h), (Interest-a), (Repossess-i), (Loan-b), (Collateral-e), (Lender-g), (Good Credit Rating-d), (Borrower-f) 


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North Dakota State University
NDSU Extension Service