Interest Rates and Loan Terms Made Simple
Interest rates—and how they’re applied—are often the most confusing and crucial part of borrowing. Think of the interest rate as your “cost of borrowing,” expressed as a yearly percentage. A fixed rate provides stability with a predictable monthly payment, making it easier to plan and budget. Variable rates, by contrast, may start lower but can rise with market shifts, raising your total cost during the life of your loan. Another essential concept is the APR (annual percentage rate), which combines the interest rate plus lender fees to provide a comprehensive view of what you’ll pay each year.
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