Saw a meme with a guy paying back a $32,720 loan with a 30% interest rate and people in the comments said he’s gonna nearly 100 grand, or an extra 37k. How does interest actually work cause I’d assume the 30% meant 30% of the 32 grand?
In: Economics
Video games cost about $60. Since you don’t have $60, you borrow the game from me for $1 a day because you want to play it right away. It’s a great game and you really enjoy it, so you want to borrow it for a whole year. At the end of the year, you owe me $365 which is 6x the cost of the video game. Interest is the cost of borrowing money.
Edit: To add on, time is the bigger factor for the person you mentioned. 30% is very high, but how long the person is carrying the loan is significant.
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