Everyone who borrows or had borrowed in the past is always wary of interest rates. It is, after all, the premium that comes with every loan or any amount of money borrowed. It is also why many people would rather live in slight indigence until the next paycheck rather than to ask for cash with strings attached.
Nevertheless, it is not realistic to say that people should just wait for their next pay or when they will finally have extra cash. In many situations, borrowing is only necessary especially when a person committed to a long-term financial responsibility. Some of the best examples of the same include houses, cars or even a business. This is where loaning money is more of a necessity than a last resort.
Understanding Interest Rates
The one thing everyone has to remember when borrowing is that the act is essentially goodwill towards the people. It would be lengthy to discuss how this process came about, but simply put, someone along the way made it a business by putting a price on that goodwill. Without it, Rapid Loans, quick cash loans and other financial products and lenders would not exist.
As of now, almost all personal loans start at 10% for $1,000. If the amount goes up, so does the interest rate. It is basic economics and to anyone still wondering, just think of how taxation and OCR works. The bigger the amount, the bigger you pay/owe.
At times, the interest rate will also depend on the repayment period. Compressed repayments, something from six months to a year, will yield high interest rates. This is only advisable for people with high disposable income. On the other hand, large loans for houses and cars may have smaller interest rates but the repayment period will have to average 36 months or more.
To Ease Pressure
To buy more is never a reason to take out a loan. Not only will it put a person in a worse financial situation, it would also signify a deep-seated destructive behaviour towards money. Loans are only for life purchases or when times get particularly tough. It really does not get any clearer than that.
Interest rates will always be there, but its significance will depend on where the person uses the money. It is a grind to pay for a loan used in buying luxuries, while those used in buying investments for life are well worth it.