Why Is There Such An Interest In Interest Rates?

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Why Is There Such An Interest In Interest Rates?
When you borrow money, you generally have to pay back the original amount you borrowed, plus a certain percentage of what you borrowed.

Two words have been dominating headlines: interest rates.

That’s because interest rates play a big role in our economy, influencing how much you spend each month.

An interest rate is the amount a lender, such as a bank, charges to borrow money — whether that’s a student loan, a mortgage, or a credit card.

When you borrow money, you generally have to pay back the original amount you borrowed, plus a certain percentage of what you borrowed.

You may be wondering why your interest rates often change.

One year you may pay one rate for a car loan. And the next, it may be a few points lower or higher.

The total amount you pay in interest varies depending on the length of your loan, if you’re considered a high or low risk borrower, or if your loan has a fixed interest rate, meaning it will not change. If your loan has a variable interest rate, it will vary, and that’s based on an index. When the index changes, so may your interest rate.

So, what makes the interest rate index rise or fall?