Consumer Interest

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DEFINITION of 'Consumer Interest'

A type of interest that is charged for personal loans, including automobile loans and credit card debt. This type of interest constitutes all forms of nondeductible interest that consumers must pay. It excludes deductible interest such as mortgage interest.

BREAKING DOWN 'Consumer Interest'

Consumer interest is considered the worst kind of interest because it is not deductible and is typically charged at a higher rate than other types of interest. For this reason, many consumers have turned to home equity loans as a means of converting their nondeductible consumer interest debt into deductible mortgage interest.

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RELATED FAQS
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. When capitalizing interest, will interest accrue while you are in a deferment?

    When capitalizing interest, interest accrues while a person is in a deferment of his loan. In the event of a deferment, the ... Read Full Answer >>
  3. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  4. What are some examples of simple interest loans?

    Two good examples of simple interest loans are simple interest car loans and the interest owed on lines of credit such as ... Read Full Answer >>
  5. How can I use the correlation coefficient to predict returns in the stock market?

    Simple interest is most commonly seen in short-term loans, such as those from payday lenders or pawn shops. You might see ... Read Full Answer >>
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    Individuals, businesses and governments use common types of debt instruments, such as loans, bonds and debentures, to raise ... Read Full Answer >>

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