Why would one lender charge different rates to different borrowers for the same loan? why would...

Why would one lender charge different rates to different borrowers for the same loan? why would two different lenders charge different rates to the same borrower for the same loan?

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Expert Solution

Here's a breakdown of the various forms of interest, and how each might impact consumers seeking credit or a loan.

Fixed Interest.
Variable Interest.
Annual Percentage Rate (APR)
The Prime Rate.
The Discount Rate.
Simple Interest.
Compound Interest.

why would two different lenders charge different rates to the same borrower for the same loan?

Lenders typically use risk-based pricing models when assigning interest rates. Simply put, this means they charge more interest for riskier borrowers (those with bad credit, high debt ratios, etc.). Low-risk borrowers, on the other hand, typically pay less over time by securing a lower rate.

jeff jeffy answered 1 year ago

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