The Interests Rate is said to be the amount or the sum that the borrower pays for the transitory use of the funds of a lender. The relationship between the borrower and the lender is very clear by the definition of the interest. Prime interest rate can also be defined as the payment received by the lender for giving up temporarily the ability to spend money for the purpose of lending money to the borrower.
For example, if a borrower intends to borrow $100 for $10 per year, then the current interest rate will be 10 percent per year. The interest rate is always expressed in terms of percent per year. At the end of the year you may have to pay $10 apart from the initial money of $100.
So many reasons of existence of the
prime interest rates are there. When a lender's point of view is considered, the interest rate is means to compensate him as the lender gives his power to purchase by lending the sum to the borrower. In the banks, there is different importance of the
federal reserve interest rates as they always are responsible to allow them to stay in their bank business. The interest rate generates the profit, which in fact allows the banks to continue running.
For the borrowers, the
current mortgage interest rates make their decision to spend now rather than later for their home. Larger or more expensive purchases are also possible for the borrowers with interest rates such as a car or a house. Even the education is now affordable to the borrowers just with the help of interest rates.
Apart from this, interest rates are great source of income for those people who are willing to move ahead with the use of their money.
