Ever wonder how interest rates work and why they are different? Or even why you need to pay an interest rate?
What Is An Interest Rate?
An interest rate is a percentage of your borrowed amount that the lender charges you to borrow that money, aka have a loan. Because you are borrowing someone else’s money and they technically own whatever thing you have a loan on, this is literally the cost of doing business. This, simply, is how the lender makes money.
Why Are Interest Rates Always Changing
Depending on your lender, they will charge you a certain interest rate. It is up to the lender to decide what interest rate they charge. Market and competition between lenders is what causes interest rates to fluctuate. Every lender has a “bottom line” or break even cost that varies from company to company. This just means that every company has a threshold where they make money and lose money. This is why you will never see an interest rate at 0% or even 0.2%. The lender needs to make money too!
Since changing interest rates is how the lending market stays competitive, the best thing to do is choose a lender with a good rate, but even better customer service. The lender with the best rate isn’t always the best lender. How your lender treats you and educates you on what you are signing your life away to is the lender you should seek out and choose. Even better, a lender who will coach you through paying back your loan and getting out of debt is the best type of lender. The more people that do business with crappy lenders, the longer those lenders stay in business.
If you’d like to see what interest rates look like today or if you’re ready to get this new home buying journey started, reach out to us here at The Ben Lemon Team at 801-507-2700 today! We would love to work with you!