In: Finance
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?
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.