What is Interest Rate?

Interest Rates are a percentage amount that banks charge from borrowers in return for providing them money at the time of need.

Let’s read about the different types of interest rates-

Fixed Interest Rate

The interest % or amount remains the same throughout the loan duration. It doesn’t increase or reduce with time

Increasing Interest Rate

The rate of interest and amount increases the longer one takes to repay the loan after the loan period is completed.

Reducing Interest Rate

The interest amount reduces every time we repay a part of the loan as the interest is calculated on the amount left to be repaid.

Compound Interest

Original amount is multiplied by the interest rate at the end of the year and the result of this becomes the amount to be paid. It goes on until full amount is paid.

Check out our simple and compound interest calculators.

Points to remember

Compare Interest rates before taking a loan.
All banks do not offer the same interest rate on different loans.
All other things being equal, you should go for the national bank offering the lowest rate of interest for your loan.

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