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Whether obtaining a mortgage, buying a car, or obtaining credit cards, credit ratings can make all the difference. However, what many people fail to take into consideration is just how much credit ratings can affect interest rates.Personal Loans Of all areas where credit ratings affect interest rates, the one impacting consumers the most is personal loans. The most popular type of consumer loan, they can be obtained through banks, credit unions, or other sources and can be used for any purpose, such as home improvements or paying off medical bills. While lenders will advertise the availability of these loans with very low interest rates, those rates generally apply only to those who have perfect credit. However, most personal loans made today are considered unsecured loans, meaning no collateral needs to be put up to get the loan, and these loans generally have very high interest rates. This has a direct impact on credit ratings, since the more successful a person has been making payments on time, the greater the chance they will receive a lower interest rate when applying for a loan. For those who have been consistently late making payments or have missed payments altogether, loans may either be denied or carry much higher interest rates.Home Buying For prospective homebuyers, credit ratings can make all the difference when it comes to obtaining lower interest rates. Prospective buyers who have high FICO scores between 760-850 can expect to be offered lower interest rates when purchasing a home, while those with scores of 620 or lower are categorized as subprime, meaning they will be offered much higher interest rates while also being given fewer choices when it comes to types of loans. To qualify for a mortgage of any kind, a score of 500 is the minimum required by most lenders.High Interest Rates, High Monthly Payments Credit ratings are considered so important because even the slightest variation can result in hundreds of dollars more per month being paid out by consumers.
While that may not sound like a huge difference to some people, the fact is those few percentage points will add up to tens of thousands of dollars more being paid out over a 30-year mortgage.Credit Cards and Credit Ratings Most people today have at least one credit card, with many having several at their disposal. But as with personal loans or mortgages, one’s credit ratings can have a dramatic impact on obtaining credit cards too. For those people with excellent credit, they will often be able to obtain cards that are considered to be at Platinum, Gold, or Silver levels, meaning they will have higher credit limits and lower interest rates.

But for those consumers who have questionable credit ratings, their applications may be denied or they will be offered cards with much lower credit limits and higher interest rates.While it may be hard at times to make payments as scheduled, those who do often see the rewards when it comes time to purchase a home or car. She is a contributing writer to this and other blogs and also writes email newsletter articles, press releases and web content. Prior to her writing career, Natalie worked in various fields including real estate, equipment leasing and banking. It is the interest rate that banks agree to use when they lend each other money in the financial markets based in London.
That seems like an obscure fact, but there are several reasons that the London Interbank Offered Rate actually has influence around the world.First of all, London is actually a massive hub for international finance. Although New York is the center of the American financial system, London is the crossroads between Europe and the Americas, making it a perfect clearinghouse for European and American banks to interact. So while the LIBOR originates in London, it affects banks all over the world who conduct transactions or maintain branches in London.History of the LIBORBefore going into the other reasons the LIBOR is important in world finance, it is good to learn some more background about where it comes from.
Up until recently, the LIBOR was put together by a group of leading British banks called the British Bankers Association, or BBA. Every day, Thomson Reuters would publish the LIBOR at varying time horizons, from one day out to a year. The news company would poll the banks and then publish the average.Starting in 2012, British and international regulators uncovered a long-standing conspiracy among bankers in the BBA to manipulate the LIBOR for their own gain. They would try to move the LIBOR to help each other out, or to make their banks look creditworthy when they really were not. Furthermore, the United Kingdom’s government took over control of the LIBOR from the British Bank Association.

The LIBOR still reflects international lending rates, but it is no longer under the direct control of banks.The Importance of the LIBORThe LIBOR has implications far beyond London.
Instead of coming from negotiations between banks, they are just a slight adjustment of the relevant LIBOR for the loan in question.
For example, a German bank lending to a Japanese one for an overnight loan might offer them a rate of LIBOR + .25%. It is a huge time-saver for banks, because banks lend to each other constantly, and having a starting point for interest rates makes these loans much smoother to execute on both sides.Almost every large bank in the world uses the LIBOR frequently when lending or borrowing money. This puts the impact of the rate manipulation scandal into perspective: Small changes in the LIBOR affect billions of dollars worth of loans around the entire world. Any problems with the LIBOR mean banks will no longer trust each other as readily, which means they are less willing to lend to each other, and it becomes easier for banks to run out of money and go bankrupt.
In the post-2008 financial environment, this kind of risk is unacceptable.To reduce such risk and ensure proper oversight, the LIBOR is now under the control of the UK government. This crucial interest rate is simply too important to the stability of international finance to be left unregulated and open to similar scandals.

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