If you borrow money, you owe someone or some company a debt. You have made a promise to pay back the principal (the amount you borrowed) with interest. Whoever loaned you the money earns something while they do not have use of their money. This is how banks work.
Have you ever run short of money and asked your parents for a loan? They may have charged you interest as a lesson. We all borrow money in life – to buy a car, home, and to pay for college.
Your first venture into a loan will most likely be through a credit card. Credit is borrowing. Using a credit card is really taking out a loan. Credit-card companies and banks that issue credit cards are letting you borrow their money when you use their cards.
Learn all about credit now, before you start using it. If you understand the advantages and disadvantages of credit cards, they offer a convenience that can be worth the price. But remember: credit does come at a price!