The borrowing rate is the interest rate at which a borrower can lend capital from a creditor.
The borrowing rate is usually quoted as an annual percentage rate and represents the price of the borrowed capital. This depends on various factors, such as the creditworthiness of the borrower, the term of the loan, the amount of the loan and the general interest rate level on the market. As a rule, the higher the risk that the borrower will not be able to repay the loan, the higher the interest rate on the loan.
Loan interest rates can vary for different types of loans. For example, the loan interest rates for an instalment loan are usually higher than those for a construction loan, because in a construction loan the financed property serves as collateral. Thus, the risk for the lender decreases.
The borrowing rate is an important factor when deciding on a loan, as it has a significant influence on the cost of the loan. It is therefore worthwhile to compare different loan offers and find the best borrowing rate.
