An intrest rate is basically a fee you pay as a service to the people you owe the money to because they allow you to have the money or object and it makes it worth while for the provider and it also is a way for companies to either make more money long term or a lower amount in short term. So for example if you buy a TV and get a 5% interest onto your monthly payments. Lets say it was a $2,000 TV and you paid them $500 upfront; this means you are financing the remaining $1,500 you owe for the TV but they are letting you keep the TV as long as you pay the monthly payments and the interest. Lets say you have $300 monthly payments which would take you 5 months to pay off. Well the first month they add 5% to that $300, which makes your monthly total for that month actually $315. So you pay that and then the next month you have to pay the 5% again and then the next month and so you are always paying an extra 5% to the total of the amount due per month. So instead of paying $300 per month, you pay $315 per month and the company makes an extra $75 off of you because by the end of the 5 months you will have paid $1,575 instead of the original $1,500 you owed them. This is the fixed interest rate.
A compound interest rate means that the 5% is added on to the previous month's total. So the first month you would pay $315 and the second month you would add another 5% to get $330.5 and then the third month would be another 5% added on to bring you to $347.28 for that month. In total it would end up costing you an extra $240.31 over the course of the 5 months. This means the more months added to the agreement the lower you pay per month, but they are continuing to get 5% out of you ever month. So if you financed the TV over a 10 month period and had $150 monthly payments, the payment would only be $157.5 the first month, then $165.38, then $173.64, then $182.32, then $191.44, then $201, then $$211.06, then $221.61, then $232.70, then your last payment would be $244.33. Thats a total of about over $500 extra that you would pay, but sometimes its worth it if you need the lower monthly payment. So companies can make quick money, or they can make more money over a long term and a lot of companies have started the compound interest thing and so they can make more money over the long term because thats ultimately what they are after. Interest rates have been falling compared to about 4-8 years ago not the economy is a no longer at its lowest, so this a better time to purchase expensive things compared to 4-8 years ago.
A zero interest rate policy or zirp is a route taken by a central bank to keep the base rate at zero per cent in an attempt to stimulate demand in the economy by making the supply of money cheaper. The term is also used to describe a near zero benchmark rate set by countries such as the UK in the post financial crisis years, which kept interest rates near to zero and accompanied that policy with measures such as quantitative easing.
