what is the purpose of an interest rate?
In: Economics
A loan is a product. If you buy a book from a bookshop it costs, say, £10. If you want to book, you pay its price. You could wait until you stumble across it in the charity shop or your friends buys and lends it to you, but if you want the book *now* you buy it for £10.
A loan is the same way: you want £100 *now*, the cost is, say, 10%. A lender will give you £100, and the fee is £10, assuming you pay it back within the given timeframe.
With a typical product like a book, you pay the fee and take the product. With a loan, you take the product and pay the feel at (or *by*) a later date.
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