$170 a month sounds cheaper. It costs $781 more.

How a loan is paid back.

A credit card lets you borrow again and again. A loan is different: you get one amount, then pay the same bill every month until it's gone.

The three numbers of every loan

An installment loan has three numbers. The principal is how much you borrow. The APR is the yearly cost, with interest and most fees counted. The term is how long you have to pay it back. A down payment lowers the principal before you start.

Where each payment goes

Each month, interest is figured on what you still owe, just like on a card: balance × APR12. Your payment covers that interest first, and the rest pays down the principal. As the balance shrinks, less goes to interest and more goes to principal. This schedule is called amortization.

Longer term: smaller payment, bigger total

Stretching a loan out lowers the monthly payment, but you owe the money longer, so you pay interest for more months. Dealers often ask "what monthly payment do you want?" because a small payment hides a long term. Always compare the total cost: payment × number of months.

What you're looking at: one bar per year of the loan. Each bar is that year's 12 payments, split into the part that pays down what you owe (green) and the interest (orange). Early years are more orange; later years are almost all green.

Car loans: how much is too much

Before the dealer, get a loan offer from your bank or credit union, so you know a fair APR. Put money down, keep the term to 4 years or less, and keep the car payment to about 10% of your take-home pay. A car also costs gas, insurance and repairs on top of the loan.

Student loans: federal first

To get federal student loans, you fill out the FAFSA. They don't need a credit check, the rate is fixed and set by law each year, and they come with options if you struggle to pay later. With a subsidized loan, the government pays the interest while you're in school. With an unsubsidized loan, interest adds up the whole time, and it's added to what you owe when you start paying. Private student loans from banks need good credit or a co-signer and usually have fewer protections, so they come last.

Payday loans: the trap

A payday loan is a small loan due on your next payday, about 2 weeks later. The fee looks small, often $15 for every $100. But there are 26 two-week periods in a year, so the APR is about 390%. If you can't pay it all back, you pay another fee to "roll it over." The CFPB found that more than 80% of payday loans are rolled over or followed by another one within 2 weeks. Your emergency fund from Unit 3 is the real fix.

Loan detective.

Six loan offers, each with one question. Do the math from this lesson, then tap your answer. One try each.

What you're looking at: made-up loan offers. Each one lists the facts you need, then asks one question about it.

The pitcher plant: easy in, hard out.

A pitcher plant is shaped like a tall cup. Sweet nectar on its rim draws insects in. Inside, the walls are slippery and point downward, so an insect that steps in can't climb back out. Getting in took one step; getting out is nearly impossible.

What you're looking at: an illustration, not data. A pitcher plant, with one ant outside heading for the sweet rim and one sliding down the slippery inside.

Why this sticks. A payday loan is the sweet rim: fast cash, no credit check. The rollover fees are the slippery walls. The way to never get caught is to never need the rim: keep your emergency fund full.

Grab a friend or a study group.