What are interest rates and how do they work?

What are interest rates and how do they work?

Interest rates are the cost of borrowing money, expressed as a percentage of the loan amount. They can affect loans, savings, and investments.

How do central banks influence interest rates?

Central banks adjust interest rates to control inflation and stabilize the economy. Lower rates encourage borrowing, while higher rates can slow down spending.

What factors affect interest rates?

Factors include inflation, economic growth, monetary policy, and the demand for credit. These elements can cause rates to rise or fall.

How do interest rates impact my savings?

Higher interest rates can lead to better returns on savings accounts, while lower rates may result in minimal growth for your savings.

Can you explain fixed vs variable interest rates?

Fixed rates remain constant throughout the loan term, while variable rates can change based on market conditions, affecting your payments.