The interest rate plays a significant role in determining the total interest paid on a loan or investment. Generally, a higher interest rate will result in a higher total interest paid, while a lower interest rate will lead to a lower total interest paid.
The difference in the total interest paid can vary depending on the specific interest rate and the duration of the loan or investment. Even a small difference in interest rate can accumulate over time and result in a significant change in the total interest paid.
For example, let's consider a $10,000 loan with an interest rate of 5% per year and a repayment period of 5 years. In this case, the total interest paid would be $2,762.50. If the interest rate were increased to 6% per year, the total interest paid would rise to $3,177.50, resulting in a difference of $415.
Therefore, it is important to carefully consider the interest rate when taking out a loan or making an investment, as even a slight difference can have a substantial impact on the total interest paid over time.