Borrow

Financial Dictionary -> General Finance -> Borrow

To borrow something, whether in regards to money or an item is to take possession of said money or item for a set period of time before giving it back to the original owner. Rules may apply.

Borrowing occurs in everyday life, from borrowing your neighbor's bicycle pump, to renting out a DVD from the store. The most common form of borrowing is financial borrowing.

Financial borrowing is when a borrower (person or business) approaches a lender (bank or other financial institution) and obtains some form of loan. This spans lots of different forms, but common loans include mortgages and the use of a credit card.
Borrowing a mortgage involves obtaining a lump sum from a bank and using it to fund the purchase of real estate. Then over a set number of years the mortgage is paid back at regular intervals with interest.

Interest is used in almost all loans and financial borrowing; it is the means by which financial institutions make profit.

Using credit cards as an example, you are given a card with a credit limit, say $1,000. During the month you can use the card to pay for goods or withdraw cash up to $1,000 - you then have 30 days to pay back the balance borrowed in full, or a minimum amount. If it isn't paid in full interest is the added on incrementally.

Borrowing money is now a fundamental part of everyday society, and most people can no longer function without borrowing some form of money, whether it is for personal or business use.