DEFINITION of 'Cheap Money'
A loan or credit with a low interest rate, or the setting of low interest rates by a central bank like the Federal Reserve. Cheap money is good for borrowers, but bad for investors, who will see the same low interest rates on investments like savings accounts, money market funds, CDs and bonds. Cheap money can have detrimental economic consequences as borrowers take on excessive leverage.
INVESTOPEDIA EXPLAINS 'Cheap Money'
When money is cheap, it is a good time for borrowers to take on new debt or consolidate existing debts. However, borrowing more than one can afford to repay was one of the primary catalysts of the 2008 recession.
Here are a few examples of cheap money:
-A credit card with a 0% introductory APR for 12 months
-A 30-year fixed-rate mortgage at 4% interest
-An auto loan at 0.5% interest
The interest rate charged to commercial banks and other depository ...
The interest rate at which a depository institution lends funds ...
In the most literal sense, money that is easily acquired. Academically ...
An interest rate on a liability, such as a loan or mortgage, ...
The amount charged, expressed as a percentage of principal, by ...
The actions of a central bank, currency board or other regulatory ...