Variable-rate loan

(redirected from Adjustable Rate Loan)

Variable-rate loan

Loan made at an interest rate that fluctuates depending on a base interest rate, such as the prime rate or LIBOR.

Variable-Rate Loan

A loan with an interest rate that changes periodically. Generally speaking, a variable rate loan is linked to some major benchmark rate; for example, the interest rate may be stated as "LIBOR + 1%." The loan may or may not have a cap on how much the interest rate can rise or fall, or on how often the interest rate may change. Very often, the initial interest rate for a variable-rate loan is lower than that for a fixed-rate loan. This allows more people to qualify for a loan; however, this kind of loan can be risky because the interest rate (and therefore the monthly payment) can rise unexpectedly. See also: Adjustable-rate mortgage.
References in periodicals archive ?
Larger franchise operators that have a financial executive may be more likely to consider an adjustable rate loan, because they have an eye to financial statements and can make a decision on when to pay down debt or to refinance into a fixed-rate product.
The latest Holiday Retirement loan is a seven-year, Freddie Mac, adjustable rate loan are secured by a 78-property portfolio of independent living facilities located in 30 states across the country.
Rollins has fallen behind on payments on her adjustable rate loan. She said she now owes $180,000 on a property that is not worth half that amount.
The problem is worsened still further by the tendency of adjustable rate loan borrowers to underestimate the amounts by which their rates can increase (Bucks and Pence 2006, 2).
The lender may make an adjustable rate loan without considering whether or not the borrower can realistically repay the loan.
Initially, the company will acquire various adjustable rate mortgage backed securities (MBS) in the market, but expects that over time it will primarily hold MBS created from its adjustable rate loan originations.
* Loans that have an initial fixed rate of 5 percent that changes after seven years to an adjustable rate loan. This type of loan would be good for home buyers who know they are going to relocate in a few years, Bell said.
Remember, a good lender, once he or she understands your financial situation, should be able to present several scenarios, which include getting a second mortgage, refinancing the first mortgage, getting an adjustable rate loan or simply cashing out the equity in your home.
First, if the lender increased the annual percentage rate by more than 12.5 basis points on a fixed rate loan or 25 basis points on an adjustable rate loan (decreases in APR do not trigger delay); second, if the lender adds a prepayment penalty; or, third, if the lender changes the loan from a fixed rate loan to an adjustable loan.
If you have a subprime loan and/or an adjustable rate loan that enticed you with a low teaser rate that also allowed you to pay no money as a down payment; especially if you are about to lose your house, or if 40 percent-plus of your take-home income goes into your house or condo...
The typical lender's product menu today almost certainly offers some kind of convertible adjustable rate loan (CARM).

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