How Do Banks Calculate Interest On Loans

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Interest Rate on Loans. How do banks and credit unions determine the interest rate you pay on your loan ? There are several factors. Your Credit Score: You might see an advertisement for a great rate on that gets you in the door. Before you shop for a new set of wheels, it’s important to understand these are attractive promotional rates that go.

Setting the Rate. Lenders also take the type of mortgage into consideration when setting your loan rate. Mortgages that put the bank at higher risk, like a fixed-rate mortgage instead of an adjustable-rate mortgage, normally come with slightly higher interest rates.

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