In our modern financially driven society, loans provide us a way to spend more money than we currently have. This can be anything from a mortgage to buy a home, a student loan to get through school, or a car loan to buy a car. Whatever the need is, some bank or company will be their to lend us money.

Loans are a staple of how we live our lives. For most of us our biggest debt and largest expense will be our home mortgage. This financial tool lets many of us reach the dream of owning a home, without having to save up every penny before we make the purchase. Almost everything we want to buy, can be financed with a loan. The cost of doing so may be high and can depend on a number of factors, including: credit, employment, what we purchase, and more. The lender must determine how much risk there is that we will not pay them back, and what options they have if that happens. Based on their percieved risk and desired return on their investment, they determine how much they will charge which is the interest rate.