The topic of high-interest rates and their effects on borrowers has become increasingly relevant in IELTS Writing Task 2 examinations. Based on recent test reports and historical data from major IELTS testing centers, questions related to personal finance and economic impacts have appeared in approximately 15% of all Task 2 questions since 2020. For students preparing for IELTS, understanding this topic is crucial as it intersects with broader themes of impact of inflation on personal savings.
The impact of high interest rates on different types of borrowers in modern economy
Essay Question Analysis
Some people believe that banks should not charge high interest rates on loans as it creates financial burden on borrowers. Others argue that high interest rates are necessary for economic stability. Discuss both views and give your opinion.
This question requires a balanced discussion of both perspectives while also presenting your personal viewpoint. The topic connects closely with how high-interest loans impact borrowers.
Sample Essay 1 (Band 8.0)
High interest rates on bank loans have become a contentious issue in modern economies. While some argue against these rates due to their burden on borrowers, others support them for maintaining economic balance. This essay will examine both perspectives before presenting my viewpoint.
Those who oppose high interest rates have valid concerns about their social impact. Elevated borrowing costs can significantly strain household budgets, particularly for middle and lower-income families seeking mortgages or education loans. Moreover, small businesses struggling to secure financing may face reduced growth opportunities or even bankruptcy, leading to job losses and economic stagnation.
However, proponents of high interest rates present compelling economic arguments. These rates serve as crucial tools for controlling inflation and maintaining monetary stability. When interest rates are appropriately high, they encourage saving while discouraging excessive borrowing, thereby preventing economic bubbles and potential financial crises. This perspective aligns with The impact of microfinance on poverty alleviation.
In my opinion, while high interest rates can create short-term challenges for borrowers, they are essential for long-term economic health. The solution lies in finding an optimal balance where rates are high enough to maintain stability but not so excessive as to cripple economic growth. Banks should also consider implementing flexible lending policies and importance of debt repayment strategies for credit health.
Banking professionals analyzing interest rate impacts on economic stability
Sample Essay 2 (Band 6.5)
Nowadays, many people discuss about whether banks should charge high interest rates or not. I will discuss both sides of this argument and give my opinion.
On one hand, high interest rates create problems for people who borrow money. When rates are high, people must pay more money every month for their loans. This is very difficult for poor people and small business owners. Sometimes they cannot pay their loans and get into bigger problems.
But other people say high interest rates are good for the economy. Banks need to make money to stay in business. Also, high rates stop people from borrowing too much money. This helps control inflation and keeps the economy stable.
I think high interest rates are necessary but they should not be too high. Banks should be fair when they decide interest rates. They should also help people who have difficulty paying their loans. This way, both banks and borrowers can benefit.
Key Vocabulary
- Contentious (adj) /kənˈtenʃəs/ – causing disagreement or argument
- Monetary stability (n) /ˈmʌnɪtəri stəˈbɪlɪti/ – steady state of money supply
- Economic bubbles (n) /ˌiːkəˈnɒmɪk ˈbʌbl̩z/ – market situation where prices rise far above true value
- Cripple (v) /ˈkrɪpl/ – cause severe damage or problems
- Optimal (adj) /ˈɒptɪməl/ – best or most favorable
Concluding Remarks
Practice writing your own essay on similar topics such as:
- The role of interest rates in controlling inflation
- Government regulation of banking interest rates
- Impact of interest rates on housing affordability
Share your practice essays in the comments section for feedback and improvement suggestions.
