Why Does Borrowing Money Cost More over Time?

Teacher Tips

Hook

• Put the three £500 borrowers on screen (repaying over 6, 12 and 24 months) and ask pairs to predict who pays back the most, and why, before you reveal anything. Some will pick the 6-month borrower because the payments are bigger. It helps to give that view space, as it’s exactly the instinct the session is about to test.
• The reveal is one idea, said plainly: £500 doesn’t cost £500, it costs £500 plus the cost of time. Generally, the longer you borrow, the more it costs in total. It’s worth using the phrase “the cost of time” on purpose, as it comes back in the lock-in.
• On “Is borrowing always a bad idea?”, pose the two opposing viewpoints and let learners argue it out before you weigh in. This is the trickiest moment for a non-specialist teacher, so it’s worth reading the speaker notes beforehand, as they carry the explanation. The point to land: borrowing isn’t bad in itself; not knowing what it will really cost is.

ITZA Pathways

• Pathway 1 (What Is Borrowing?) covers loan types, APR and simple-interest calculations. Pathway 2 (Understanding Interest Rates) covers simple versus compound interest, and minimum credit card repayments.
• As you circulate, you might ask “If a lender offers smaller monthly payments, what happens to the total cost?” Expect “it’s cheaper” first, and follow up with “Cheaper each month, or cheaper overall?”
• More questions worth asking as you go round: “Why do you think lenders advertise the monthly payment rather than the total?”, “Why might a credit card’s minimum payment be set so low?” and “What happens to the total if the APR goes up, or if the loan runs for longer?”
• It’s worth checking learners can explain compound interest in their own words: interest charged on the interest as well as on the original amount. It helps to check they’ve spotted that it works against you on debt, not just for you on savings.
• For less-engaged learners, connect borrowing to things they already know, such as phone contracts, buy-now-pay-later and hire purchase on cars. For faster learners, you might send them to the AI Buddy to model a real borrowing scenario. For everyone, the key question is “Why do loans end up costing more than expected?”
• Early finishers can go to the Borrowers Minigame once both pathways are properly finished.

Classroom Activity

• It helps to split the class into teams of three or four before you display the Crack the Code slides. Teams discuss each question, then show their answer together on a count of three, which stops anyone copying before they’ve committed. Miniwhiteboards work well.
• You don’t need to know anything about borrowing yourself, because every answer and explanation is on the slides and the speaker notes carry a hint for each round. About a minute per round is enough, with a little longer for Round 2, which needs some maths.
• The hidden sentence works best as a mystery, so it’s worth not hinting at what it says. Point at the question marks (each one is a word) and, after each answer, you might ask the class to read what they have so far and guess how it ends.
• Round 1 is the warm-up: Sam borrows £200 and repays £230, so the extra £30 is the cost of borrowing. If a team gets it wrong, that’s fine, as the later rounds build on the same idea. The hint if teams are stuck: extra paid means what Sam repaid minus what Sam borrowed.
• Round 2 is the one to hold back on. Many teams will be tempted by the loan with the smaller monthly payment (Loan A, £20 for 24 months, against Loan B, £45 for 9 months), and it helps not to say whether that’s right until the answer slide. It’s the “small monthly payments are a good deal” misconception in action. The hint: work out each loan’s total separately, then compare. Loan B comes out £75 cheaper (£405 against £480).
• Round 3 asks for the difference between the two totals (£660 over 12 months, £750 over 36 months), not either total on its own. If teams answer with one of the totals, the hint is to take the smaller total away from the bigger one. The point to land is that the same £600 was borrowed both times, and taking longer to repay is what cost the extra £90.
• Round 4 needs no maths, just everything from the first three rounds. The hint: “Which figure shows the true, full cost, not just what leaves your account each month?” The answer is the total repayment. Reveal the last piece and let the class read the whole sentence aloud together.
• On the discussion slide, take the three questions in order, about two minutes each, and ask teams to talk for 30 seconds before anyone shares: “What does the secret sentence mean, in your own words?”, “Which round surprised you most, and why?” and “What is one thing you would check before agreeing to borrow anything?” You’ll be listening for “the total I would repay”, “how long it will take” or “the interest rate (APR)”. If the class goes quiet, try “Would you rather pay £405 or £480 for the same thing?” If time is short, keep the first question and skip the rest.

Plenary

• Part 2 asks what learners would check before signing any credit agreement, and what would make them walk away. Push for specifics they've worked with today: the total repayment (not just the monthly payment), the APR, the repayment period, and a clear "walk away" trigger.
• The lock-in is from Suze Orman, a financial author and advisor: "A debt is a promise to pay tomorrow for what you bought today with extra interest added for the privilege of waiting." It ties back to the hook, as "the privilege of waiting" is the cost of time. You might ask learners to give you the cost of time in one of the examples they worked with today.