What is an Interest Rate?
An Interest rate is essentially the price of money. For example, if I want to borrow money, the cost of borrowing that money is Interest rate that is charged. Conversely, if I lend money to someone, the price I would charge for loaning the money would also be tied to the current Interest rate.
How is the Interest rate determined?
Many variables help determine current Interest rates. For example, the availability of credit, government fiscal and monetary policy and many other factors affect current rates. Luckily for us, we don’t have to calculate all of the variables that affect the price of money, instead this information is reflected in Interest rates.
Where are Interest rates today?
Interest rates are near historical lows. There are many reasons for this, but the primary cause has been the monetary policy of the U.S. government which has flooded the market with money in an effort to jumpstart the housing market. This policy is the result of the severe recession caused by the subprime mortgage debacle. Low Interest rates help the housing market by lowering the cost of borrowing money required to purchase a home. It also helps current homeowners by allowing them to refinance their existing mortgage at a lower rate. Additionally, low rates also help current homeowners with adjustable rate mortgages by enabling them to refinance and lock in low rates rather than facing the prospect of steep increases in mortgage payments when rates eventually rise.
Are Interest Rates Going Up or down?
Predicting Interest rates is a very difficult task due to the multitude of factors that can effect rates. The average historical Interest rate from 1942 until 2010 is 9.8%. While Interest rates are currently near historical lows, a simple analysis would seem to indicate a reversion to the mean. However, because of the complexity of information and number of variables that are involved with determining rates, accurate predictions are very difficult. For example, there was a consensus that Interest rates would rise after the 2008 recession. This prediction, while based upon sound analysis, has proven to be wrong as rates have continued to hold near historical lows.
Are Loans The Only Way to Get Money?
As a matter of fact no. Depending on what you are going to use the money for there are a host of different Scholarships or Grants available to qualified individuals. The criteria for these scholarships or grants vary but there are ones available for almost anything you can think of. Searching the web for your perticular need + scholarships or grants will bring up thousands of different websites with information on each one. Checkout our Scholarship section or our Grants section for a list of websites and resources.