Interest rates and cost of borrowing
Interest is the money you earn when you save your money in a savings account, or the money you will have to pay to borrow money.
When interest is high, loans will be expensive, but you get a higher return on your savings. On the other hand, if interest rates are low, you will earn less on your savings but also pay less on loans.
Pause for thought
Imagine you are considering borrowing £500 pounds for a year.
Complete the table to show how much you will have to repay at the different rates of interest.
You can use the following interest calculator if necessary:
Would you be less likely to take out the loan as the interest rate rises?