Lesson 300 · 4 min
The real cost of a loan
The interest rate in the ad is rarely the whole story, and AI can help you add up the full cost before you sign.
A loan ad says "only 1% a month" and it sounds cheap. What you actually pay depends on how interest is counted, plus fees and add-ons. AI is a useful helper for reading the terms and doing rough maths.
Watch how interest is calculated. With a flat rate, interest is charged on the full original amount every month, even after you have paid part of it back. With a reducing balance, interest is charged only on what you still owe. The same headline rate can cost very different amounts.
Then add everything else: processing fees, insurance packaged with the loan, early repayment fees and late fees. Ask the lender for the total amount you will repay and the yearly cost in writing. Be very careful with quick-loan apps that ask for access to your contacts or photos.
Check the AI's numbers yourself with a calculator, because it can make arithmetic mistakes. Before signing, read the contract, compare offers from licensed banks, and ask the bank or an independent adviser about anything unclear.
Do it now
Compare two loan offers
- 1. Write down each offer's amount, term, rate, how interest is counted and every fee.
- 2. Paste them into a chatbot with the prompt below.
- 3. Redo the key totals on a calculator or a bank's loan calculator.
- 4. Take your questions to the lender and get the final figures in writing.
Compare these two loan offers: [paste details]. For each, explain whether interest is flat or on a reducing balance, estimate the total I would repay, and list every fee. Show your working step by step so I can check it, and list questions I should ask the lender.
Quick check
Keep going
Next →Compare insurance plans with AIWords from this lesson
- Hallucination
- When an AI states something false with confidence, such as a made-up fact, quote or source.
- Human in the loop
- Designing a process so a person reviews or approves the AI's work before it has real consequences.