Factors Affecting Bank Interest Rates

There are several factors that affect your bank interest rates. Economic inflation, card usage and your credit score are just some of the factors that can affect your interest rate. Make sure that you pay your monthly bill on time and more than the minimum whenever possible to help lower your interest rate. 

Federal

The Federal Reserve Bank sets the standard for all bank lending. They decide what minimum amount of interest can be charged for any type of loan. From there, the bank can add to the total interest rate based on several factors such as what the loan is for, credit scores, the bank's profit, and so on. 

Bank

The size of the bank plays a big part in determining the interest rate on any loan. The larger the bank, the lower the interest rates they can offer because they are more well established than a smaller bank, such as a local credit union. Bigger banks can borrow directly from the government while smaller banks and credit unions have to borrow from larger banks who then borrow the money from the government. 

The Borrower

The person that borrows the money from the bank is the ultimate deciding factor in the interest rate of the bank loan. The borrower’s credit score, the amount of money they are borrowing, what the money is being used for and whether or not there is collateral such as a house, car or business to back the loan all contribute to the interest rate. Lower interest rates are usually afforded to those consumers who maintain a strong credit rating.