Interest rate is defined as the percentage of an amount lent over a certain period of time. This is one of the primary concerns of a borrower when seeking the most suitable loan. There are many factors affecting the interest rate. For example, in the United States, it is controlled by the Federal Reserve and is adjusted in accordance with how the economy is faring. When the economy is strong as indicated by strong housing, employment and consumer spending, interest rates are raised to curb possible inflation. Conversely, if the economy is slow, interest rates are cut. Lenders raise and lower interest rates based on this movement set by the Fed. Hence, it is advantageous if the potential borrower is familiar with the different types of interest rates that come with loans.

One type of rate is the fixed rate. This means that the rate of the loan remains the same during the entire term of the loan even if market rates vary. Lenders can offer interest rates which are higher or lower than the official rate at that time; hence, one must conduct his own research and compare rates. The main advantage of this type of rate is that it is immune to the variations in the market and can turn out to be cheaper especially if official rates increase. In a variable interest rate loan, the starting rate is set by the lender and he has also the right to change the rate during the repayment period. This change occurs in response to movement of official rate as notified by the Federal Reserve and the borrower ends up paying more if market rates rise and less if rates are lowered. Most loans of this type do not impose restrictions for making additional payments and the borrower can pay off the loan sooner if he so desires.

In addition to the above mentioned interest rates, there are other factors that could affect the interest rate. Lenders obtain information from consumer reporting agencies about their loan applicants, whether they pay bills on time, have filed for bankruptcy or have been sued. These reports are used to assess the risk of lending money to the borrower. A higher risk translates to a higher interest rate charged for the loan, thus making it harder for the borrower to clear his debt.

Lastly, interest rates are also determined by competition among the lenders. Lending is a business and therefore profits must be made. Their aim is to make an adequate profit margin based on official rates and the borrower’s credit.

Payday loans

March-18-2009 Wednesday

Payday loans

Making Forex Market Forces Work for You

January-21-2009 Wednesday

There are numerous tools available for the futures trader to help him profit from the market. However, one should also include an analysis of the market forces themselves, for properly utilized, can benefit a forex trader well.

Risks In The Forex Trade

January-18-2009 Sunday

It's not all money in forex. There are risks involved, and if you're beginning trader, you better know about them. knowing these risks will improve your trades and help you make money.

The Central Banks

January-18-2009 Sunday

The central banks plays a major role in the market of currencies particularly with the interest rates.A trader's familiarity with the activities of the central banks can help him predict the market's direction.

Riding the Elliott Waves

January-18-2009 Sunday

The Elliott Wave principle or the Elliott Wave theory is a concept that divides any major market movement into five waves or phases. It has long been held that this idea can apply to the forex market as well, and should be of interest to forex investors.