I is for Interest Rates and How They Affect Your Finances

I is for Interest Rates and How They Affect Your Finances

interest rates and how they affect your finances

Interest on borrowed money is a reality that comes with taking out any type of loan. But, it is part of the cost necessary in order to borrow money from a bank or other institution. Interest rates are typically expressed as percentages and interest expense is often expressed as a dollar amount. This type of payment is often associated with credit cards, mortgages, penalties, savings accounts, and various types of loans. 

When borrowing money, interest is nearly impossible to avoid. As it is the way that lenders are able to get paid for the money you are borrowing. This is insurance against risks the lender is taking. On the other hand, you can earn interest from your savings account as banks use this money to lend out.

How much interest a person pays depends on many variables, such as the amount of loan, credit score, risk of loan, length of loan, etc. Federal rates also greatly affect the amount of interest to be paid. 

Being in any type of debt is typically advised to be avoided, especially if you must pay more than you borrowed. But most people cannot buy a house or a car outright. Therefore shopping around for the lowest interest rates is helpful to your long term finances. Talk with your financial advisor today for help finding the best rates for whatever type of loan you may need.

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