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Points, also known as discount points, allow you to lower your interest rate by prepaying some of the interest. So instead of repaying the interest on the loan over the loan's life, you can prepay some of the interest up front by paying points. Each point you pay for equals 1% of the total loan amount and reduces the interest rate charged on the loan. When shopping for loans, ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid. Paying for points can make great sense depending on how long you expect to own the asset, such as your home, and how much the lender charges for the points.

Refer to the related link to see if it makes sense for you to pay points.