Hi everyone! Liam here. Today we are talking about the other side of the financial coin: borrowing money. Most of us will need to borrow at some point, whether it is for a car, a house, or our education. But not all debt is created equal. Knowing the difference between a helpful loan and a dangerous one is a skill that will save you a fortune.I am Maya! Borrowing can be a great tool to help you reach your goals, but it comes with significant risks. Today, we are going to compare different forms of borrowing, from student loans like O S A P to credit cards and payday loans. We will look at how borrowing affects your credit rating and what happens if you carry too much debt.Hi! I am Chloe. For many Canadian students, the most common way to borrow is through federal and provincial student loans. In Ontario, this is called O S A P, or the Ontario Student Assistance Program. One of the biggest benefits of government loans is that they are usually interest-free while you are in school full-time. They also offer grants, which is money you do not have to pay back! You can apply for O S A P online, and they even have a calculator to help you estimate how much aid you can get. The risk? Well, it is still debt. You have to pay back the loan portion once you graduate. If you take on too much student debt, it might make it harder to save for a home or a car later. Have you checked if you are eligible for O S A P yet?And I am Noah. While student loans are generally seen as good debt, other forms of borrowing can be very risky. Let us talk about credit cards. Used correctly, a credit card can actually improve your credit rating. This rating is like a report card for your money. If you pay your balance in full every month, you show lenders that you are responsible. But if you fail to comply with payment conditions, your credit rating will tank. A poor credit rating means you might be denied for an apartment or pay much higher interest rates on a car loan. Even worse, too much debt can lead to bankruptcy, which stays on your record for years. Credit cards have high interest rates, often around twenty percent. If you only pay the minimum, you will be paying off that one thousand dollar laptop for the next fifteen years! Is that a trade you are willing to make?What about other options? You might look at a personal loan from a bank or credit union. These are often cheaper than credit cards and are great for buying a vehicle or paying for tuition in installments. There are also lines of credit, which give you access to a set amount of money that you can use whenever you need. Some people use a line of credit to pay off their student loans because the interest rate might be lower. Another option is borrowing from friends or family. This can be very convenient because the repayment terms are usually flexible. But there is a huge personal risk. If you do not pay them back, it can ruin your relationship forever. Money is never worth losing a friend over. Always think about the “Who” and the “What” before you ask for a loan.Now, we have to talk about the most dangerous form of borrowing: payday loans. These are small, short-term loans that are very easy to get, sometimes without even a credit check. But they are incredibly expensive! A payday loan might charge you fifteen dollars for every one hundred dollars you borrow for just two weeks. If you calculate that as a yearly interest rate, it is over three hundred percent! Why do people seek them? Usually because they are in an emergency and cannot get a bank loan. But payday loans often trap people in a cycle of debt where they have to take out a new loan just to pay off the old one. Compared to a bank loan or even a credit card, payday loans are a financial disaster. Always look for community resources, like local bursaries or payment plans, before you ever step into a payday loan store.If you do find yourself with debt, what are your options for repayment? The best strategy is to pay as much as you can, as often as you can. Additional payments go straight toward the principal, which means you pay less interest in the long run. You could also look into working overtime or finding a side gig to increase your income. Some lenders offer payment plans that work with your budget. If things get really tough, there are community resources like non-profit credit counselors who can help you make a plan to get debt-free. The key is to act early. Do not ignore your bills! The sooner you face the debt, the easier it is to manage. What would you do if you realized you could not make your next loan payment?So, to recap our borrowing landscape: Student loans like O S A P are a powerful tool for education but must be managed carefully. Credit cards are great for building your credit rating but only if you pay them off every month. Avoid payday loans at all costs! And finally, always consider the personal and financial risks before you borrow from anyone. Debt is not always bad; it is a tool. If you use it wisely, it builds your future. If you use it poorly, it breaks your budget. You have the knowledge to tell the difference. Use your analytical skills to choose the path that keeps you in control.We have looked at the risks and benefits of all kinds of loans. In our final video, we are going to take everything we have learned and build a real budget for your first year out of high school. We will see how to balance your income, your expenses, and your debt payments to make sure you start your new life on a high note. You are doing a fantastic job learning these complex topics. Keep your head up and keep your eyes on the numbers. We will see you in the final lesson!
