Question

In: Finance

Why doesn’t everyone qualify for the same interest rate whenthey apply for a loan?  What are...

Why doesn’t everyone qualify for the same interest rate when they apply for a loan?  What are some of the factors that affect the rate of interest a borrower has to pay?

The U.S. national debt has recently surpassed $22 trillion (see the attached file). How do you feel the current government deficits and increase in the national debt will affect interest rates and the economy in the future? Are the government's actions the correct way to keep the economy going?

Solutions

Expert Solution

Everyone doesn’t qualify for the same interest rate on loan because different people have different rate of risk involved with them, some have high probability of difficult and some low. So higher the risk involved with a customer, higher will be the rate of interest charged for loan to him.
Factors affecting the interest rate are risk of default by the customer, credit history of the customer, the FICO score of the customer, and his performance on the past loans too.

As seen the deficit, the interest rates are tend to increase as government is gonna increase taxes on products, and there will be inflation in the economy which would cause the interest rates to rise too.
Government is trying to provide subsidies on products, and trying to increase exports and reduce imports, which might result in a decrease in the deficit.


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