If you watch any of the financial news stations on television these days, you may hear that the “Fed” rate is 0%, but that certainly doesn’t mean that that is the interest rate you will pay! The Fed rate really bears no relation to what a personal loan rate would be, other than when it is high, so is your rate.

When times are tough like they are right now, it is a good time to borrow money. Interest rates are lower and you can borrow more money for a longer period of time for less money. The bad news is that if you are lucky enough to have any money in the bank or in investments, then you are making less money than you would during good times.

There are several things to keep in mind when you get a loan. First of all, the personal loan rate is usually expressed in terms of an annual percentage rate (APR). This is the rate that you would pay on all the money you owe during one year’s time. But, if you are getting a loan for shorter than one year, you would only pay a percentage of that. Keep in mind that interest compounds (usually daily), so although the rate may say 5%, it is probably much higher than that when you consider compounded interest.

For example, a personal loan rate on a 5 year loan might be 5% APR, but over the course of five years, you would pay a lot more than 5% of the original borrowed amount. With all loans, the faster you are able to pay it off, the better, especially with short-term payday type loans. You always want to pay these back on time (and early if possible) to avoid extra charges or increased interest fees.

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