Borrowing Money And Taking Out Loans Essay - 1537 Words

Introduction Many decisions involve borrowing money and taking out loans. The need to take out loans can be crucial and necessary at different times. One example is the choice of taking out loans to cover for different things, such as college tuition, cars, homes and/or major appliances. People’s interest about credit or borrowing money can vary. People also prefer immediate gains over immediate losses. They also prefer delayed losses over delayed gains. Discounting rates in regards to the loan amount, time loan is received and interest amount can vary based on their delayed time. The attractiveness of the loan amount, the time the loan is received, and the interest amount and time can be evaluated differently . For example you are given a choice between a loan of $5,000 in 2 years and you must pay $200 and it is due in 6 months vs you receive a loan of $5000 in a week and you must pay $200 and its due in 6 months, you opinion on these to choices can be different in terms of how attra ctive they are to you. Taking loans can be a tough decision. Temporal discounting refers to the impact of time on the results in the future. In terms of temporal discounting experimental findings have indicated that loans that are received in a longer time are less valued vs loans that are received in a shorter time. Also, interest payments that must me paid in a longer time frame are easier to tolerate vs interest payments that need to be made sooner. 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