What are loans and interest calculations?

A loan is when someone borrows money from another person or place and promises to pay it back later, like borrowing a toy from your friend and saying you’ll return it tomorrow.

Imagine you want a new bike, but you don’t have enough coins. Your mom says, “Okay, I’ll give you the bike now, but you need to give me 10 coins every week for a month.” That’s like a loan, you get something now and pay back later.

Now, interest is like a little extra coin that you have to add on top of what you borrowed. It's how the person who lent you the money gets a tiny reward for waiting.

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Let’s say your mom gave you the bike worth 100 coins, and she said you’d pay back 10 coins each week for 10 weeks, that’s 100 coins total. But if there's interest, maybe you have to give her 11 coins every week instead. That extra coin is the interest.

Sometimes, people use money from banks or friends and have to pay even more coins back later because of interest, just like borrowing a toy and having to give a few extra stickers as a thank-you.