What do lenders typically set for their loans?

Lenders typically set the interest rate for their loans as it is a critical factor in determining the cost of borrowing for the borrower. The interest rate is the percentage charged on the principal amount of the loan for the use of the lender’s money. Setting the interest rate allows lenders to manage risk, ensure profitability, and stay competitive in the market.

The interest rate can be influenced by various factors, including the overall economic environment, the borrower's creditworthiness, and prevailing market rates. An appropriate interest rate reflects the balance between the lender's desire for profit and the borrower's ability to repay the loan.

While the principal amount, credit standards, and closing costs are also important components of a loan, they are not typically set by the lender in the same way the interest rate is. The principal amount is usually determined through the borrower's need, credit standards refer to the requirements that borrowers must meet, and closing costs are expenses incurred to finalize the loan process—these aspects might vary based on policy or negotiation rather than being dictated in the same manner as the interest rate.