Know What Your Interest Rate Means To You

When you finance something you have to pay interest on it. When you put money into an interest-bearing account, the bank or other institution pays interest to you for the privilege of using your money. Either way, what kind of interest rate you’re dealing with is important.

1040643 chrymirror Know What Your Interest Rate Means To YouIf you have a high interest rate on something that you buy you’ll pay a lot more than you should have. It’s better to shop around and try to get a lower interest rate if you can because it can save you hundreds or even thousands of dollars over time, depending on what you buy and how long you finance it for. This is especially true of houses because the repayment period on them is so long.

When it comes to a situation where you’re getting paid interest, such as a bank account or CD, naturally you want to get the highest rate possible. Whether you’re getting paid compound or simple interest is also something that you want to look at, because compound interest can offer you a lot more over time than simple interest can. With the compound interest system you’re getting paid interest on the interest that you’ve earned as well as the principal, instead of just on the principal. Be careful, however, that you pay attention to other terms when setting up an account that pays you interest. Depending on these terms and restrictions versus the amount of interest you’re being paid, it might not be beneficial to you in the long run.

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