What is an Interest Rate?
An interest rate is a charge for using money. In other words, a lender may offer money that a person can use, but will charge a rate for the use of that money. This means that the person who borrows the money will need to pay back the principal amount, plus the interest amount.
Calculating the Interest Rate
The rate is generally calculated on an annual basis. If the interest rate on a loan is 9% this means that the amount you will be charged for borrowing $1,000 can be calculated as follows:
9/100 * $1,000 = $90.
In other words, you will need to pay the bank $90 per annum for the cash. The higher the rate, the higher the annual charge for borrowing the money will be and the lower the rate, the lower the annual charge will be. In other words, the size of the interest rate directly impacts the amount of money you will need to repay on your loan.
Choosing Loans and Interest Rates
Before you sign on a loan it is important to know what the interest rate is and what that means in terms of how much you will need to pay back on a monthly basis and over the life of the loan. The rate will impact your repayments and may affect how well you can repay the loan. Depending on the lender, the rate you are offered may be directly related to your credit score with a lower credit score resulting in a higher interest rate. With other lenders, such as car title lenders, there is no credit check so your credit score is not taken into account when working out the rate for your loan.
Negotiate the interest rate on your car title loan and then apply for your low rate loan.