Understanding Types of Interest Before Borrowing Money

 
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Understanding Types of Interest Before Borrowing Money

At LoanMart, we are always committed to providing our customers with the information they need to make the right choices when borrowing money. An online Auto Title Loan is a serious commitment that may provide relief from overwhelming debts for a period of time, and we are here to make sure customers understand all the terms of a loan.

When borrowing money, detail of interest and how it changes payment amounts is explained, but it’s hard to understand how the concept works without some basic information. Most lending institutions don’t take the time to make sure that consumers understand the intricacies of interest, and we want to change that.

Types of Interest

Interest is simply defined as the cost of borrowing money. Typically, interest is expressed in a percentage of an overall loan. For borrowing money, the original loan (principal) along with the cost of borrowing the money (interest) must be paid back. There are three common types of interest.

  • Fixed Rate Interest: In a fixed rate loan, a fixed percentage of a loan is paid back over the life of the loan. Fixed rate interest loans are easy to calculate the total cost of the loan because the amount stays the same each month.
  • Variable Rate Interest: With variable interest rate loans, the lender has the ability to change the interest rate to match current market demands. Consumers may benefit from any drops in the market over the life of the loan, but may also pay more if other conditions improve.
  • Annual Percentage Rate: Often expressed as APR, this is the percentage of interest that is paid on the loan calculated yearly. If your monthly interest rate is 2%, the APR would actually be 24% as the percentage is multiplied by 12 months in the year.

Contact Us Today

Not only do we work to simplify the borrowing process, we also want to answer any questions about interest on an Online Auto Title Loan. Call us today at LoanMart to get the application started.

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