is a more efficient use of capital instead of not loaning it out
will increase a taxpayers tax liabilitymay be lower than what could have been earned had the lender deployed capital for their own investment purposemay attract negative attention in some situations depending on the borrower rate of interest and circumstanceinterest and macroeconomicsa low interest rate environment is intended to stimulate economic growth so that it is cheaper to borrow money this is beneficial for those who are shopping for new homes simply because it lowers their monthly payment and means cheaper costs when the federal reserve lowers rates it means more money in consumers pockets to spend in other areas and more large purchases of items such as houses banks also benefit from this environment because they can lend more money however low interest rates aren t always ideal a high interest rate typically tells us that the economy is strong and doing well in a low interest rate environment there are lower returns on investments and in savings accounts and of course an increase in debt which could mean more of a chance of default when rates go back up in response to covid 19 the federal reserve began enacting monetary policy as early as march 2020 3 then as the pandemic eased the federal reserve began raising the federal funds rate 4 as this federal funds rate influences the interest rate on many other types of loans borrowers soon found it to be more expensive to incur debt 