Question

How does fluctuating APR affect the middle class, students and big business to include their bottom line?

Answer 1

In Fluctuating APR rates change due to change in prime lending rates or index rates.

Middle class: If the index rate goes up home loans,car loans, personal loans, etc get costlier however fixed deposits rate also go up , saving bank rate might go higher encouraging middle class to park their funds in banks. Reverse happens if APR goes down.

Students: Education loan rates vary with fluctuating APR. If prime rate goes up higher education loan rates will affect students. However reverse can occur if prime rates go down.

BIg Business: SInce rising APR affects the cost of debt the earnings after tax gets reduced. The total cash flow to the firm decreases as higher APR results in higher interest payments to the lenders.The bottom line shrinks. Reverse occurs if APR goes down.