How are interest rates set? Why do they increase and sometimes decrease?
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How are interest rates set? Why do they increase and sometimes decrease?
The interest you pay on loans you take depends on the total amount you already owe. The more loans you take, the more reluctant they are to give you more. The interest rates increase with this reluctance. If you pay loans back, the amount you owe is reduced and with it the interest rate on new loans. The interest rate of existing loans does not change.
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