Interest rates are a key factor in any financial decision, from taking out a loan to investing in a savings account. But what exactly are interest rates and how do they work?
Lexington Law answers these questions in this video.
Interest rates are the cost of borrowing money, and they're expressed as a percentage of the total loan amount. For example, if you take out a loan for $1000 at an interest rate of 10%, you'll owe $1100 back to the lender. The higher the interest rate, the more you'll pay in interest over time.
Interest rates can also be applied to savings accounts. In this case, the higher the interest rate, the more money you'll earn on your deposited funds.
Interest rates are determined by a number of factors, including inflation, economic conditions, and central bank policy. In general, when inflation is high, interest rates will also be high in order to encourage investment and discourage borrowing. When economic conditions are weak, interest rates may be lowered in order to encourage spending and boost economic activity.
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https://youtu.be/Nn1aH5YHsv0
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