Borrowing Money

Question 19 • 26-27 Ignite Technical Math-Financial Math - MA2007

Why is the interest rate of a loan one of the most important things to consider when shopping around for loans?

Answer

The interest rate should be ignored, because there’s nothing a consumer can do to change it.

The interest rate is essentially how long you have to pay off your loan, and the shorter the better.

The interest rate can drastically change the total amount paid to the lender, in the case of mortgages, up to thousands of dollars.

The interest rate does not change, even between banks, so choosing the right time to borrow is essential.

Explanation

The interest rate determines how much extra you pay to borrow money, in addition to repaying the amount borrowed. Even a small difference in rates can add up to thousands of dollars over the life of a mortgage, so comparing rates is important. Choice C correctly describes this effect.

AI-written and checked against the verified answer.

More from this Course

Financing a Car

Applying for a Loan

Leasing vs. Buying a Car