What is an Interest Rate of Loan?

Interest rate, borrow money from a credit institution or a bank to finance a project or property at a cost. It’s the interest rate. Here’s what you need to know about the question.

What do we really mean by the interest rate?

What do we really mean by the interest rate?

In the banking sector, an interest rate is a sum of money paid by a borrower (an individual, a company, a local authority, the State) from an economic agent (usually a bank or a credit institution) in return for the loan of capital. Sometimes we talk about renting money. The interest rate is expressed as a percentage of the amount of the loan.

What are the different interest rates?

interest rates

Several interest rates exist in the banking sector depending on the cases envisaged. It is thus possible to distinguish the fixed rate from the variable rate, the first being fixed from the beginning while the second varies according to various factors.

Similarly, it is possible to distinguish simple and compound interest rates according to whether interests themselves produce new interests or not. In addition, the nominal interest rate should be differentiated from the real interest rate: the first is established by the creditor at the time of the conclusion of the contract on the basis of various elements (policy interest rate, risk level, wage bill, etc.). creditor institution, commercial policy, etc.) while the latter is a rate corrected by inflation.

In any event, if the interest rate is a sum of money paid by the borrower in exchange for the loan, it should be remembered that it plays a leading role in the indebtedness of the debtors. The lower the interest rates, the more debtors will tend to borrow.

 

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