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How Interest Rates Are Determined

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When you borrow money, the cost of your loan or line of credit is determined by the interest rate the lender offers, the loan fees, and how long you take to repay.
Even a small difference in your interest rate can have a big impact on the amount you eventually pay, so it's worth understanding how interest rates are determined and what you can do to lower yours. The following factors have the greatest impact on your rate:
  1. The general level of interest rates in the economy
    This is influenced by actions of the U.S. Federal Reserve Bank, levels of inflation, demand for borrowing money, the stock market, and a number of other factors.
  2. The specifics of your loan or line of credit
    Your interest rate is also influenced by:
    • How much you borrow.
    • What kind of loan you get, and whether you put up collateral or not. For instance, the interest rates on a home equity loan (where you use your home as collateral) are generally less than for unsecured credit.
    • The term of the loan — how long you take to pay the money back.
  3. Your relationship with your lender
    Wells Fargo offers discounts to our customers. For instance:
    • Automatic loan payments. If you sign up to have your eligible Wells Fargo Private Student Loan payments automatically deducted from your Wells Fargo checking account, you can lower the interest rate on that loan by 0.25%.1
  4. The lender's overall assessment of your credit risk
    Lenders assess your credit risk based on a number of factors, including your income, employment history, credit history, and credit score.

    Depending on your other factors, you can lower your interest rate by raising your credit score. That could save you hundreds or even thousands of dollars over the life of a loan.
Check your rates
To estimate your rate for a Wells Fargo loan or line of credit, use one of our rate calculators.
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1 Wells Fargo retains the right to discontinue or modify our rewards for future disbursements at any time without notice. Reduced interest rate requires continued automatic payment from a personal checking or savings account. If the automatic payment is cancelled at any time after repayment begins, the discount will be lost until automatic payment is reinstated.