Cheap Money

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

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Monetary Policy

    The actions of a ...
  2. Tight Monetary Policy

    A course of ...
  3. Discount Rate

    1. The interest ...
  4. Easy Money

    In the most ...
  5. Interest Rate

    The amount ...
  6. Fixed Interest Rate

    An interest rate ...
  7. Federal Funds Rate

    The interest ...
  8. Boom

    A period of time ...
  9. Industry

    A classification ...
  10. Prisoner's Dilemma

    A paradox in ...

Articles Of Interest

  1. Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  2. 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.
  3. How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  4. Student Loan Debt: Is Consolidation The Answer?

    Consolidating your student loans offers convenience, but there are drawbacks.
  5. What Investors Should Know About Interest Rates

    Understanding interest rates helps you answer the fundamental question of where to put your money.
  6. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.
  7. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  8. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  9. 5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  10. Invest Like A Pro

    By following the strategies of the pros, even a beginner can learn to invest like an expert.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center