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Control Your Debt CrisisBe in charge of your debt in England and Wales |
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Book: Control Your Debt Crisis Debt Dictionary My blog on Wordpress Home page Debt Dictionaryat controlyourdebtcrisis.co.ukinterest rateThe interest rate is the level at which a charge for borrowing money (interest) is levied. It is calculated as a percentage of the amount lent, or as a percentage of the amount still owing. The rate may be unchanging through the loan, or vary according to criteria applied – with credit cards the lender has a strange freedom to vary those criteria at will. There are two major variants in interest rates: simple and compound. Simple interest is not added back into the loan for further interest calculation, but compound interest is charged on both the loan principal and on any further additions. Put another way the total sum outstanding at the time of calculation is used for the new interest charge. Credit cards do exactly this. A set term loan is more likely to be charged at simple interest. Not to be confused with a loan such as a mortgage, where the repayments are calculated far ahead from calculation of the total sum if these regular payments are met. However the terms should be carefully read as it is likely slow or late payment will cause extra interest charges and may also incur late or other charges. Interest rate charged can affect costs and vastly increase the amount of the loan. Interest charges may be calculated daily, monthly or at any other period - even erratically, if the contract permits it. There is a failure of law and regulation in this area. At national level the rates are influenced by Bank Rate, as well as by the economic outlook, and by the balance between demand for loans and availability of funds. Bank Rate involvement means that consumer rates are at the mercy of larger concerns and since 1997 the UK rate has been dominated by inflationary concerns. But rates are also affected by factors such as deferred consumption, alternative investments, risks of investment and liquidity preference. Credit has many markets and the consumer is only one of those. Others include the 'money market' (between the institutions), the bond market (mostly government securities), currency markets and 'retail' business like banks (the savings and loan domestic activities to consumers and business. It is a classic economic view that increases in the money supply will increase inflation – as with 'bubbles' – (controlled by governments through the 'printing press' to increase it and Treasury Bills and bonds to vary liquidity). Deflation comes from the collapse of liquidity through reduced circulation (velocity of circulation). While the near collapse in velocity is ushering in a period of deflation [well into 2010 if not 2011, I reckon] raging inflation will almost certainly follow it because of years of reckless money printing in the US in particular - something which is now being adopted in the UK and seems on its way round the world like a raging bush fire. Joseph Harris - Debt Control Man, Author of Control Your Debt Crisis on Your Own Terms LinksUseful links will be found throughout the site, and I will be grateful for any further suggestions. |
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Copyright © 2008 Joseph Harris, © S P Publications, © Get Results Books, © Control You Debt Crisis. This copyright material may be used only for strictly personal use unless permission is sought and granted under any terms agreed. Please ensure acknowledgment of copyright is included with any use - ©Joseph Harris www.controlyourdebtcrisis.co.uk. For any other use please contact me at this email address. email Joseph Harris, Publisher
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Control Your Debt Crisis On Your Own Terms; Make Creditors and Debt Collectors Obey the Law