Interest Rates, Nominal interest rate, Default rate
When we say interest Rates or interest rate we mean the cost of money, i.e. the price for a loan for the use of money capital of a banking institution for a specified period of time.
There are many types of interest rates, such as lending rate, deposit rate, rate credit card interbank, interstate and several others.
When referring to the interest rate as a mean value component that represents all kinds of interest rates. If the lending rate is 5% per year meant that when someone borrow a specific capital should at the end of the year to pay off the particular borrowed capital and 5% extra.
The interest rate is subject to changes that reflect market conditions. The setting of interest rates made by central bank decisions. The criteria by which decisions are made to change the interest rate is quite complex and related to the design of monetary policy in an economy of a state.
Nominal interest rate is the interest rate specified in the lending or other contracts and does not include any kind of supplements or as late payment charges and overdue.
Default rate is the rate charged plus a lending agreement, if the borrower is late in paying one or more tranches or avoid total repayment of the loan to the lender. The default rate is usually defined by law, but can be and agreed between the parties.
When someone would borrow any money capital of any bank should always know precisely the terms of the loan agreement.
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