Differences in interest rates

In the money market, the interest on borrowed money varies due to following reasons:

• Interest rate is low, if the offered securities are easily realizable (E.g. Gold). If securities are difficult to realize quickly, the interest will be high (E.g. Land).
• Interest for long-term loan will higher than that of short-term loan. This is because of the fact that the lender loses his command over his money for a long period of time in the case of long-term loan. So he expects higher interest rate for such loans.
• Interest rates vary according to purpose for which loan is obtained. Nationalized banks charge lower interest for agricultural loans when compared to consumption loan.