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Bad credit loan
calculated as a
percentage of the amount borrowed. For example, a borrower in Australia who is
charged 12 per cent interest would pay 12 Australian dollars a year in interest
for every 100 dollars of the loan. Interest is charged to give lenders of money
a return on their investment. This pays them for giving up their right to use
the money for a period of time or to make a profit in other ways. In some cases,
where there is a risk that the loan might not be repaid, the interest may be
very high.
In some Muslim countries, the charging of interest is illegal. But in most
countries, interest plays an essential part in commerce. Businesses,
governments, and consumers borrow and lend money, and thus they pay and receive
interest. Businesses borrow money to buy new machinery or to build new
factories. Businesses pay interest out of higher earnings made possible by the
borrowed money. At times, one business invests in another and receives interest
on its loan. Governments borrow to make up the difference between the money they
spend and the funds they collect in taxes. A government pays interest on money
it borrows. Consumers pay interest if they borrow to buy a home or a car. When
people deposit money in a savings account, they are lending funds to a bank or
other financial institution. Therefore, they receive interest. |
