Cheap Money

Filed Under » , ,
Dictionary Says

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 Says

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

Articles Of Interest

  1.

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.

  2. How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.

  3. What Investors Should Know About Interest Rates

    Understanding interest rates helps you answer the fundamental question of where to put your money.

  4. Student Loan Debt: Is Consolidation The Answer?

    Consolidating your student loans offers convenience, but there are drawbacks.

  5. Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.

  6. Interest Rates: Nominal and Real

    An interest rate is the cost of borrowing money, expressed as a percentage of the loan amount. Interest rates are the primary yardstick for measuring how much return lenders will get. However, ...

  7. How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.

  8. Top 4 Most Scandalous Insider Trading Debacles

    Here we look at some of the landmark incidents of insider trading.

  9. Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.

  10. How Leverage Is Used In Forex Trading

    Forex trading by retail investors has grown by leaps and bounds in recent years, thanks to the proliferation of online trading platforms and the availability of cheap credit. The use of leverage ...
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center