Interest rates play a critical role in your financial management. At First Savings Bank, we’re committed to helping you comprehend and leverage competitive rates. There are several types of interest rates that you should be aware of such as mortgage, simple, compounded and more. Let’s dive into what interest rates can do for you and the impact they make on the economy.
Interest rates represent the cost of borrowing money or, likewise, the return on investment for lending money. Often expressed as a percentage, interest rates can be fixed or variable. There are several factors that can influence these rates like the Federal Reserve, economic conditions, inflation and market demand.
Breaking Down Different Interest Types
Understanding the different types of interest rates can guide you in making sound financial decisions. Some of the most popular interest rates include simple interest, compound interest, APR, APY and mortgage.
Simple Interest Rate – This is calculated solely on the principal amount of a loan or investment, not accounting for any earned or accrued interest over time.
Compound Interest Rate – Contrary to simple interest, compound interest incorporates both the principal amount and any interest already earned or accrued, leading to potentially significant growth over time.
APR vs. APY – APR (Annual Percentage Rate) is the annual cost of borrowing money, combining both the interest rate and any additional fees. APY (Annual Percentage Yield) reflects the total amount of interest earned on an investment over a year, taking compounding into account.
Mortgage Interest Rates – mortgage interest rates are the cost of borrowing the principal loan amount. What is APR for a mortgage? It includes both the interest rate and the other associated costs. Mortgage rates are influenced by various factors, including your credit score, loan term, loan amount and market conditions.
Impact of Interest Rates on the Economy
The Federal Reserve controls interest rates to handle inflation and steer economic growth. When the economy is overheating, the Federal Reserve will make rate hikes to curb excessive borrowing and spending. Conversely, during economic slowdowns, interest rates may be lowered to stimulate borrowing and investment.
Maximizing your Savings with Interest Rates
A crucial factor in saving money is the interest rate on your savings account. Most banks offer accounts that pay you interest on the money you deposit, enabling your savings to grow. The higher the interest rate, the more your money will earn. So, what is your current interest rate? At First Savings Bank, we offer a variety of checking and saving account options that offer competitive rates. We’re committed to help you find the right account that matches your goals. Anytime you are looking to find the best interest rate, whether it is to grow your money or borrow, always be sure to compare your options.
Contact us today by calling 1-833-372-4968 to learn more about all our account opportunities or if you are ever exploring your lending options.
