What is an Interest Rate?

By Melissa Cook Reviewed by Minh Tong Updated Nov 30, 2022
What is an Interest Rate?

Interest rates are the cost of borrowing money. The amount charged for this loan is commonly referred to as the interest rate. Interest rates can vary based on several factors, including the amount borrowed and your credit history.

There are two main types of interest rates: fixed and variable. Fixed interest rates stay the same throughout the term of a loan, while variable interest rates may change at any time depending on economic conditions or other circumstances.

Fixed Interest Rates

A fixed interest rate is one that remains the same over the life of a loan. This type of interest rate is ideal for borrowers who want predictability and stability in their monthly payments. It can also be beneficial to those looking to take out a large loan or refinance an existing mortgage, as it reduces the risk of rising rates over time.

Variable Interest Rates

Unlike fixed interest rates, variable rates may change at any time based on economic conditions or other factors. While this can make them more volatile than fixed rates, variable interest rates are typically lower than those of fixed mortgages. They can be a good option for borrowers who expect to see their income increase over time and are willing to accept some risk in exchange for lower monthly payments.

Ultimately, the type of interest rate that is best for you will depend on a number of factors, including your financial situation and risk tolerance. You should carefully consider all of your options before making a decision about which type of interest rate is right for you.​

To learn more about interest rates and how they work, speak with an Americor professional today.


Melissa Cook

Melissa has a degree in English and marketing from University of California Irvine. She is a creative and accomplished content writer and editor with comprehensive experience developing rich, compelling content for a variety of websites. With her expertise in writing a broad range of content, combined with outstanding interpersonal skills and commitment to exploring innovative ideas, Melissa has done an excellent job developing content for blogs, articles, social media, and the company website. When she is not writing, Melissa spends most of her time cooking, traveling the world, and catching her favorite Broadway shows.