Welcome to English as a Second Language Podcast, number 352, Understanding Interest Rates.
This is English as a Second Language Podcast, episode 352.
I'm your host, Dr. Jeff McQuillan.
Thank you.
An 8-10 page PDF file that contains all of the vocabulary definitions, new sample sentences, additional definitions, comprehension questions, cultural notes and a complete transcript of this episode.
This episode is called Understanding Interest Rates.
It's a dialogue between Kerry and Oscar about borrowing money from a bank.
Let's get started.
I need to take out a small business loan and I'm trying to figure out what the interest rate would be.
If it's the same as a mortgage loan, then I think I understand it in general terms.
The interest rate would be the percentage of the amount you plan to borrow.
It's usually calculated as an annual rate.
So, for instance, a 10% interest rate on $100 would be $10 a year.
Okay, I see.
But how is my monthly payment calculated?
As the borrower, your monthly payment depends on the term of your loan.
Each month, you'll pay money toward the principal plus the interest you owe the lender.
The bank may also assess other fees for processing your loan, so make sure to read the fine print.
Thanks.
I understand it a little better now.
Are you sure you want to go down that road?
You don't want to default on your loan and ruin your credit score.
Maybe there are other options.
Maybe there are, but I just don't see any right now.
I have an appointment with an accountant next week and hopefully she can advise me on the best course of action.
Good luck and let me know if I can help.
Thanks.
I will.
Our dialogue begins with Carrie saying to Oscar, I need to take out a small business loan.
To take out a loan means to get a loan from a bank, usually.
I'm trying to figure out what the interest rate would be.
The interest rate is the percentage of extra money that has to be paid back to the bank when you borrow money from it.
The bank gives you $100.
You have to pay 10% interest in one year.
In one year, then, you would have to pay the bank $110.
It's the price of borrowing money.
Oscar says if it's the same as a mortgage loan, Then I think I understand it in general terms.
Kerry asked him if he understood interest rates.
Oscar says if a business loan is the same as a mortgage loan, then I understand it.
A mortgage loan.
M-O-R-T-G-A-G-E, is the special name for a loan you get to buy a house.
The bank gives you money to buy a house.
That's called a mortgage.
In the United States, these loans are typically 30-year loans, meaning you have 30 years to pay the loan off.
Notice the expression to pay off a loan.
That's a phrasal verb that we use when we mean give the bank back all the money it gave you, plus interest.
Oscar says, I think I understand it in general terms, meaning generally, overall.
Not necessarily every detail, but broadly, not specifically.
The interest rate, he says, would be the percentage of the amount you plan to borrow.
To borrow is to ask for and receive money from a bank or a person.
You could borrow a pen.
You could borrow someone's car.
Probably can't borrow a girlfriend.
Not a good idea.
The interest rate, Oscar says, is usually calculated at an annual rate.
To calculate means to use numbers to find an answer to something.
Usually you have to multiply, subtract, add, or divide a number.
You can calculate the number of pounds you weigh by multiplying your weight in kilos by 2.2.
Trust me, it's better in kilos.
The annual rate is the percentage that you charge someone for a whole year, an entire year.
Annual rates for credit cards in the United States are anywhere between 12 and 20 percent each year.
Oscar says a 10% interest rate on $100 would be $10 a year, as we mentioned.
Percent is per 100.
The term percent is one word.
It's a number divided by 100.
A percentage sign is usually after the number.
We put a percentage sign after it.
A percentage sign, you probably know, is a small 0 or an O with a diagonal line and another small 0 or O on the other side of the line.
Carrie says, okay, I see, but how is my monthly payment calculated?
Your monthly payment is the amount you have to pay each month.
Makes sense.
Oscar says, as the borrower, your monthly payment depends on the term of your loan.
The term is the duration.
It's the amount of time that you have to pay your loan off.
So a 30-year mortgage has a term of 30 years.
The word term has several meanings in English.
Take a look at our learning guide for some more explanations.
Oscar continues...
Each month, you'll pay money toward the principal.
The principal, spelled P-R-I-N-C-I-P-A-L, is the amount of money that you borrow from the bank.
So in our previous example, you borrowed $100.
That's the principal.
The interest was $10 a year at 10% a year.
Principal is the money that you are borrowing.
Interest is the price you have to pay to borrow that money.
Oscar says you have to pay the interest you owe to the lender.
The lender...
L-E-N-D-E-R, is anyone who gives you money.
To lend money means to give money to someone else.
To borrow money means to get money from someone else.
Oscar says the bank may also assess other fees for processing your loan.
So make sure to read the fine print.
To assess A-S-S-E-S-S means to charge someone a certain amount of money, to collect a certain amount of money from someone.
For example, when a business accepts credit cards...
The bank assesses a fee, 2%, 3%, maybe 4% for each transaction, each purchase.
That's to assess.
Usually we use this word in formal settings, when we are talking about a bank or perhaps the government or an organization.
The bank may assess fees for processing your loan.
To process here means to make sure that a certain document or application is reviewed and approved in a.
To process your application means to get your application, to read it, to examine it, to approve it and then to get your money.
That's all part of processing an official document, or at least a loan document.
Oscar warns Kerry to read the fine print.
The expression the fine print usually refers to the specific details of a legal document or contract.
Many times in a document, a legal document, there'll be little print.
That is the words on the bottom of the contract that are very difficult to read.
This is the fine print.
You need to read that to find out the specific details of what you are signing.
Carrie says, thanks, I think I understand a little better now.
Oscar then decides to give Carrie some advice.
He says, are you sure you want to go down that road?
The expression.
To go down that road means to make a decision to do something and then to do it, especially if you have other options.
You may have three choices and you decide to take choice number one.
You've decided to go down that road, to take that path, if you will.
Oscar says, you don't want to default on your loan and ruin your credit score.
To default here means that you fail to make a payment on your loan.
You don't make a payment back to the bank that you're supposed to.
This can cause a big problem because you can then be penalized.
You can be assessed another fee if you don't pay the bank back in the regular monthly payments that it requires.
To default usually means that the bank decides, okay, you're not going to pay us back the loan.
In this case, you have to give something up to the bank.
For example, if it's a mortgage loan, the bank will come back and take your house away from you.
That's because you defaulted on the loan.
You didn't pay it.
This word default has a couple of different meanings.
Once again, take a look at the learning guide for more explanations.
Oscar says you don't want to ruin your credit score.
Your credit score is a number that certain organizations, credit organizations, give you.
It tells banks and other businesses whether you are a good person to lend money to or not.
The credit score is determined by how much debt you have, that is, how much you owe other people and how well you pay those people back, especially banks.
The higher your credit score, the higher the number you have, the better you are able to get loans from banks.
Carrie says that she is going to talk to her accountant, the person who helps her keep track of or make a list of how much she is spending and how much she is getting.
She's going to talk to her accountant and ask her what is the best course of action.
The course of action is your plan about what you are going to do or what you should do.
What is the best course of action?
What is the best thing we should do now?
Now let's listen to the dialogue, this time at a normal speed.
If it's the same as a mortgage loan, then I think I understand it in general terms.
The interest rate would be the percentage of the amount you plan to borrow.
It's usually calculated as an annual rate.
So, for instance, a 10% interest rate on $100 would be $10 a year.
Okay, I see.
But how is my monthly payment calculated?
As the borrower, your monthly payment depends on the term of your loan.
Each month, you'll pay money toward the principal, plus the interest you owe the lender.
The bank may also assess other fees for processing your loan, so make sure to read the fine print.
Thanks.
I understand it a little better now.
Are you sure you want to go down that road?
You don't want to default on your loan and ruin your credit score.
Maybe there are other options.
Maybe there are, but I just don't see any right now.
I have an appointment with an accountant next week and hopefully she can advise me on the best course of action.
Good luck, and let me know if I can help.
Thanks.
I will.
The script for this episode was written by Dr. Lucy Say, who always takes the best course of action.
From Los Angeles, California, I'm Jeff McQuillan.
Thanks for listening.
We'll see you next time on ESL Podcast.
English as a Second Language Podcast is written and produced by Dr Lucy Say, hosted by Dr Jeff McQuillan.
This podcast is copyright 2008.
