Interest Rate

Interest Rate is basically the cost of borrowing money.  Whether you want a high or low interest rate will depend on if you are the borrower or the lender.

When you open a new credit card account or take out a student loan, you are the borrower.  As the borrower you want a low interest rate.  In other words, you want a low cost for borrowing money.  Interest rate plays a huge role in determining what’s considered good debt vs. bad debt.  Credit cards (bad debt) have high interest rates, while student loans (good debt) have low interest rates.

When you invest, like when you buy CDs from your bank, you are the lender and the bank is the borrower.  That’s when you want a high interest rate.  You want them to pay a high cost for borrowing your money.

To help you remember this, just think:

Borrow Low

Lend High

2 thoughts on “Interest Rate

  1. Pingback: Credit | Millennial Finance

  2. Pingback: 3 Main Types of Investments | Millennial Finance

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