Finances can get messy. That’s why we have napkins for you. Napkin Finance gives you simple, visual, stress-saving financial tips and news. http://napkinfinance.com The Interest rate Napkin: https://napkinfinance.com/napkin/what-is-interest-rate/ Transcript: What is an interest rate? Typically expressed as a % called on APR (annual percentage rate). The rate charged for borrowing money. This is the yearly cost of borrowing or loaning money. Determined by the FED Change all the time Cary depending on type of loan High interest rate = strong economy Low interest rate = weak economy How do they work? Lender borrows money borrower (principal) Lender pays back the loan from borrower (principal + interest) When you borrow money, the amount you receive is the principal. And when you pay back the loan, you repay the principal plus interest. Borrowing money with interest costs more money Loaning or investing money with interest earns more money High interest rate - Good for lenders or bad for borrowers. Interest rates charged for Mortgages Credit cards Unpaid bills Student loans Auto loans How to get a good rate? Minimize debt Pay bills on time Maintain high credit score Lower economic growth - slower inflation (interest rate hike) Higher economic growth - faster inflation (interest rate cut)