Interest rates play an important role in the economy. They influence borrowing and saving, affecting everything from the amount you pay for a car to how quickly you repay your mortgage. A number of factors help determine interest rates, including inflation and the monetary policies set by the Federal Reserve. Understanding how these factors affect interest rates can help you make better financial decisions as a borrower or saver.

There are two types of interest rates: fixed and variable. A bank or other lender will look at several factors, such as your FICO credit score and banking statements, before deciding what interest rate to offer you for a loan or line of credit. Some personal factors can influence your interest rate, such as whether you are considered a high-risk borrower or can afford to pay back the loan or credit in a timely manner. Other factors include economic trends, such as unemployment and housing prices, and the strength of the stock market.

Interest rates are also a major consideration for businesses that buy equipment, invest in new projects and more. They can impact a company’s bottom line and even the direction of financial markets. Learn more about interest rates and what they mean for your business in our article, Five Things to Know About Interest Rates.