CommerceGuard.org is the primary site of the Commerce Accountability Project (CA Project, LLC), an organization dedicated to exposing anti-competitive, anti-labor and anti-consumer practices in industry. We rely on the support of the public to continue our work. If you would like to support us, please consider donating or volunteering. You can learn more about us here.
Glossary
InsuranceFinanceHealthcareEmployment LawPrivacy
Glossary > Finance > Credit And Lending > General
Legal Disclaimers

Interest Rate

Interest rate is the percentage of a loan or deposit that is charged as interest to the borrower or paid as interest to the lender. It represents the cost of borrowing money or the return on investment for lending money.

Example #1

When you take out a mortgage, the bank will charge you an interest rate which determines how much extra you will pay on top of the loan amount over the loan term.

Example #2

If you have a savings account with a 3% interest rate, it means that for every $100 you deposit, you will earn $3 in interest over the year.

Misuse

Misuse of interest rates can lead to predatory lending practices where lenders charge excessively high-interest rates to borrowers who may not fully understand the terms. This can trap consumers in a cycle of debt and financial instability. It's crucial to have regulations in place to prevent predatory lending and ensure fair treatment of borrowers.

Benefits

One benefit of interest rates is that they allow individuals to earn money on their savings by depositing funds in interest-bearing accounts or investments. For example, having a high-yield savings account with a competitive interest rate can help your savings grow over time.

Conclusion

Understanding interest rates is essential for consumers to make informed borrowing and saving decisions. By being aware of how interest rates affect loans and investments, individuals can choose the best financial products that suit their needs and avoid falling victim to predatory practices.

Related Terms

Loan-to-Value RatioCredit CardForeclosure

See Also

Down PaymentLoan TermMonthly PaymentRefinanceTitle LoanVehicle FinancingAPR (Annual Percentage Rate)AmortizationDTI (Debt-to-Income Ratio)Down PaymentLoan Origination FeePointsCheck Cashing ServiceHigh-interest LoanPayday AdvancePayday LenderPayday Lending RegulationsPayday Loan StorefrontPayday Loan TrapPayday LoanShort-term LoanLenderLoan DefaultsLoan GradeLoan ListingLoan Origination FeeLoan TermNoteOrigination FeePeer-to-Peer Lending PlatformCredit CardCredit LimitCredit ScoreCreditworthinessDebt-to-Income RatioInstallment LoanLoan TermLoan

Last Modified: 4/29/2024
Was this helpful?