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Final Essay

COM/172

September 10, 2010

Final Essay

The effects of interest rates should be included in any purchasing decision. When paying interest on purchases, the buyer pays more for a product that costs far less. The interest rate being charged by the company will determine the monthly payments. Low interest rates tempt people to buy things they cannot afford and force people into debt. To avoid this never-ending cycle, pay cash for products instead of using credit.

If someone is purchasing on credit or taking a loan, a higher interest rate should influence them to wait to purchase or pay less for the item. If you have cash, in times of high interest and high inflation, you may wish to spend rather the cash than see your capital depreciate in value. If it is high interest low inflation you would want to invest your money and not spend. If you are planning to borrow, high interest rates make this less attractive and in which you do not spend.

Some banks can offer better interest rates than others. Your interest rate may also depend on your credit score. You want to find the bank that will give you the lowest interest rate, as this will also affect your payment. Your interest affects how much you actually end up paying for your house by the time it is paid off. You will also need to decide if you want a fixed interest rate or not. Some banks offer you a lower interest rate to begin with, and then increase the rate later on. These factors and considerations are what mainly hinder people from purchasing a home; they worry about the ending result of a house. Buying a home is probably the biggest decision of your life, not many people consider and end up with high interest rates or even end up having a foreclosure.

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On the other hand let’s say you buy a car for $20,000 and finance it at 10% interest; with no money down payment in this example your payments would be $425/month for 60 months. At the end of 5...