At some point or another the average American will need to borrow money for something or another. The general population borrows money every day using their credit cards. According to Your 650 Score reasons for obtaining a loan might be to go to school, buy a car or to purchase a house. All of these loans come with interest rates. An interest rate is a percentage of the loan that you will have to pay the lender in addition to borrowed sum. The majority of loans are paid back on a monthly basis and included an interest fee each month.
A credit card usually has a fairly high interest rate, it could be as low as 6% or as high as nearly 40%. However interest rates on credit cards are only applied to the unpaid balance each month. Therefore if you pay off your credit card balance in full each month you will not have to pay the interest fee.
Car and house loans have lower interest rates because these are larger sums of money. They range anywhere from 2% to 10%. The average interest rate for a 30 year fixed mortgage is just under 4% while the average car loan interest rate is just over 4 percent. The term “fixed interest rate” means the interest rate does not increase over the life of the loan. Student loan interest rates are also typically around 4 percent, however this may double in the coming months and years.
All loans come at a price. While it is inevitable that you will take out a loan at some point, remember to shop around and find the best interest rate available. Don’t forget to make all of your payments on time. Also, the faster you pay off a loan, the less you pay in interest so be sure the throw any extra cash into paying off debt you may have occurred.