[[Interest Rate]]s represent;

• the price of credit.
• rate of return for saving surplus funds
  • aka. The opportunity cost of money.
    • The opportunity cost of money meaning money that could’ve been deposited into an interest-bearing account rather than spent elsewhere.

what the fuck does this mean#ask_davis#review ( source)

Interest Rate in a particular market is the price that equates the supply and demand of funds. Borrowsers determine demand for funds Savers determine the supply for funds. Changes in Interest Rates have a signficiant effect on the lvel of spending & economic rates since a large proportion of transactions rely on credit & borrowing.

Real Interest Rates are an important influencer on decisions involving borrowing & saving. Real Interest rates measure how much borrowers actually pay, and how much lenders receive. Thus;

• Borrowers prefer a lower real interest rate.

• Lenders / savers prefer a high real interest rate.

• A positive margin exists between Interest Rates & Inflation to ensure a positive return for lenders.

  • This margin is maintained by raising Interest Rates when Inflation rises, ensuring there is always a pool of borrowable funds*.

As seen below, interest rates vary across different types of loans; Because Lenders need to be compensated for different levels of risk they take on when lending funds.

Risk is influenced over time by;

• Time over which the loan is taken
  • Longer = More Risk
• Whether the loan is secured against an asset
  • e.g. Property / other collateral
• Credit record of the borrower

Low Rate Credit Card I.R

The Interest Rate on Low Rate Credit card loans are the highest of the selection of loans in the image above since they are unsecured loans to individuals.