0
$\begingroup$

I have never studied economics so the question might be very basic one and would need understandable answer: I would like to know the difference between Interest Rate term and Borrowing Rate term? As far as I understand the Borrowing Rate means when some company borrows money from the bank to pay for some internal staff needed to do their work (e.g. manufactury to buy some materials to produce their own products). Then company returns the money to the bank but with little additional fee and this additional fee is Borrowing Rate in % unit. Please confirm if this is correct. Even if it is, I still don't know the DIFFERENCE between Borrowing Rate and Interest Rate.

$\endgroup$
1
$\begingroup$

The Interest Rate is a more general term, and can cover all shorts of financial transactions where one expects by a contractual clause to get their money back plus "a little something" (I am not referring to the expected profit from an investment, where the "little something" is not a contractual obligation).

So you can talk about "the interest rate of a loan" but also of the "interest rate of a deposit in the bank".

The Borrowing Rate specifically refers to the Interest Rate that the entity under consideration (a business, a public sector, or an individual) has to accept to pay as this extra little something if they want to borrow funds.

So the "borrowing rate" is an "interest rate" - one among many kinds of interest rates.

| improve this answer | |
$\endgroup$
  • $\begingroup$ thank you for reply Alecos but i was asking about the DIFFERENCE and not definition of each term. $\endgroup$ – Timon Mar 28 '17 at 20:02
  • $\begingroup$ I would think that what I wrote shows what difference is there between them. And why are you writing "difference" in capital letters? $\endgroup$ – Alecos Papadopoulos Mar 28 '17 at 20:19
  • $\begingroup$ @Timon But anyway I added a little something. But that's all there is to it. $\endgroup$ – Alecos Papadopoulos Mar 28 '17 at 20:21
  • $\begingroup$ to emphasize the meaning of my message. Anyway, thank you again for your time for me. $\endgroup$ – Timon Mar 28 '17 at 20:46

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.