Whomever thought of the concept of interest is an evil genius.  The concept of interest seems pretty straightforward…From the lending point of view, you borrow money with the intention of paying the money back, and the lender is paid additional funds (in the form of interest) for the risk involved.  From the savings or deposit point of view, you save money in an account with an interest rate, and you receive more funds (in the form of dividends), helping your money grow.

Yes, there IS a level of fairness with this concept and I totally agree with it.  But when it comes to lending, what happens time and time again is the interest rate tends to be higher for those that are considered “riskier” borrowers.  As I had mentioned in my post about credit, those that pay higher interest rates do so, generally, because of a challenged credit score.  But these are more than likely the same people that are working long hours just to keep food on the table.  So they are the percentage of people that pay the most interest or fees, but don’t have the money in the first place to be able to afford these charges!

Interest is something I hope more people try to take advantage of to better their financial situation, as opposed to being sucked dry.  If you have money to place in a savings account, or are looking to begin saving money, shop around to other financial institutions for favorable interest rates on savings accounts, interest-bearing checking accounts, or certificate of deposit accounts (CDs).  Credit Unions usually have pretty good interest rates, compared to banks.  But it would be a good idea to shop as many financial institutions as you can, and even look for limited time specials that may be going on.  Generally, if you have as little as a few hundred dollars, and you don’t intend on spending the money in the short term, then you could gain interest by stashing the funds in these types of accounts.  And obviously, the more funds you have to stash, the more in interest you can earn.

When it comes to loans, the credit score game is what generally determines what interest rate can be offered.  Other factors, such as the amount you wish to borrow or the length of time you wish to borrow the funds, are also considered.  But even if you tend to have an interest rate that you feel can be lower, try looking into refinancing the loan with another bank or credit union.  Again, there are always some kind of specials happening which could lower your interest rate when refinancing.  Many people think refinancing is a long and tedious process (well…if the loan is for a home mortgage, then it definitely can be).  But for a car loan, for example, the process would take very little on your part to complete.  The financial institution that wants your business should be doing as much of the legwork as possible, so it should be easy for you to get done.

I’ll be discussing how to further take advantage of interest in future posts.  If you have any specific questions or topics you would like to see detailed on the site, leave a comment and let it be known!  peace.