Help me understand the purpose of extremely high interest rates? 20% seems rediculous to me.
by 
Blackberry.
ANSWERS: 2
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The cost of credit to you is the sum of the cost of credit to the lender, the cost of administration and profit, and a risk factor to represent the possibility that the loan will not be repaid. High interest rates therefore represent high administrative costs, or a high risk that the loan will not be repaid. Credit cards, for example, put the administrative costs for all cards on the people who don't pay off monthly, so they get very hight interest rates. Loans to borrowers with poor credit records are high risk, so again they pay high interest rates. Also, inflation rasises interest rates across the board.
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If your credit is bad, this is the rate you are facing. Today, the only people that receive a decent interest rate are people who "walk on water".
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