Knowing Your Current Interest Rate

2007-03-08 10:33:40

( Financial )



In paying off your loan or your mortgage, you should constantly be aware of the current interest rate involved. There are various types of interest rates, and your repayment strategy may change depending the current interest rate you have. There are four main kinds of interest rates. There is the fixed rate, the tracker rate, the discount rate, and the variable rate.

Fixed rates are interest rates that remain fixed for a particular period of time. This means that you will be paying a flat rate until a specified date, regardless of what happens in the financial market. Beware of loans that offer fixed rates, since a fixed rate is not as stable as it sounds. Fixed rates can, and do change. All a credit company has to do is inform you in writing fifteen days before they change the rate.

Tracker rates are interest rates that are pegged to a particular index rate, probably that of a national bank. This means that the rate at which you pay will depend on the current interest rate being offered by a particular country or institution.

Discount rates are interest rates that are deliberately kept low for a specified period of time. They are usually given to people taking on a new mortgage. Note that these low interest rates expire after a pre-set time, usually six months. After this period, fixed or variable rates will probably apply. Be sure to understand the credit arrangement being offered to you.

Variable rates are interest rates that change depending on a base rate. This means that changes in the base rate will result in changes in the current interest rate as well. An example of a variable rate are most money market interest rates.

In repaying your loan or your mortgage, it pays to know exactly what you are dealing with. By keeping yourself aware of the current interest rate, you will minimize your chances of making unnecessary payments.


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