What is an interest rate

0
1651
Picture of interest rates
Canstock image

What is an interest Rate

An interest rate is a percentage charged on the amount that you save or borrow.  Most are usually quoted annually, but not always, so make sure you double-check with your lender.

What is an interest rate when you borrow money

When you borrow money, you are charged an interest rate which is a percentage of the total amount of the borrowing or loan.  These rates are normally charged when you borrow money to buy something today and pay it later over a fixed term.

What is an interest rate when you save money

When you save money, banks will give you a rate which is a percentage of the amount you can earn interest on your savings.  If you save money in a savings account with an annual rate of 5% a year, you will earn 5% of the money saved annually. Click here for the Government guidance on savings tax.

What is an interest rate on mortgages

If you borrow money to purchase a property and the rate is 5% a year, it will cost you 5% of the amount borrowed.  For example, if you borrowed £100 with an annual rate of 5% you would expect to pay back £105.

Find further how-to guides:

Improve your chances of securing a Mortgage
Improve Your Credit Score
Buy a Property for the First Time
Buy and Sell a Property at the same time
Buy a Council Property
Re-Mortgage a Property
Reduce your Mortgage Payments
How to Extend a Lease Agreement
Insurance you need for a Property
Become a Landlord
Improve your Property to Sell
Insurance
Surveyors
Conveyancing Solicitor
Mortgage Finder