What is a loan?
A loan is money that you borrow and agree to pay back over a set period of time with interest. The amount of money you borrow is called principal, and interest is the cost for borrowing the money. The length of time set to pay back the loan is known as the term.
It is best to get a loan only for very large purchases or in an emergency. Getting a large loan or getting many loans that you can't pay back can cause huge financial problems, because it can get very difficult to pay them back each month.