// 845.371.2222 What are interest rates? The interest rate is the percentage that dictates how much interest you’ll pay or earn on a financial product. A higher interest rate means you’ll pay more to borrow money or earn more on an initial investment. A lower interest rate means you’ll pay less to borrow or earn less interest on your investment. Interest rates on a financial product can be higher or lower based on several factors. One factor is the Federal Reserve’s (the Fed) monetary policies. While the Fed doesn’t set all interest rates, all interest rates are influenced by the Fed’s target federal funds rate and other policies. (More on how this works below.) There are also personal factors that influence the interest you pay on a loan, mainly your “.” A bank or other entity may look at your FICO credit score, bank statements and other financial documents before deciding what interest rate to offer you. If you have a good credit score, for example, you may be viewed as more likely or able to pay off your debt and therefore qualify for a lower interest rate. Interest rates can also be fixed or variable. Fixed interest rates are locked in for the length of a loan and cannot change. Variable interest rates can change over the length of the loan depending on market conditions, meaning if you take out a loan, your payment may increase or decrease at different times. 127
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