Variable-rate loan

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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 ?
Bank and non-bank financial institutions may see non-traded interest rate risks increase if they are unable to re-price their variable-rate loans in line with changes to their funding.
Its variable-rate loans range from 3.12% to 8.09% and could rise as interest rates do.
The bill would also allow existing borrowers with high fixed-rate federal loans to refinance into new variable-rate loans.
The program offers loan lengths up to twenty-five years, as well as variable-rate loans termed at ninety days, one year, three years, and five years.
Then the bubble popped and the way that Bulgarian banks were able to resist losses was by increasing interest rates on performing variable-rate loans to offset NPLs, up to 450 basis points above the BNB rate.
In contrast, the serious delinquency rates reached nearly 22 percent for subprime fixed-rate loans and topped 46 percent for subprime variable-rate loans.
In recent years, the Federal Reserve Board has worked to hold interest rates down to unusually low levels, to help banks build profits and reduce pressure on home buyers, corporate buyers and other borrowers who have taken out variable-rate loans. Sellers of LTCI coverage, long-term disability insurance and other insurance products that depend at least in part on revenue from long-term investments in bonds have said that the low rates are cutting investment revenue and reducing the profitability of the products with a long-term outlook.
We have a good balance of variable-rate loans with over 66% of our first-mortgages and 42% of all our loans being variable-rate.
Borrowers with variable-rate loans before July 2006 could convert to consolidation loans with interest rates as low as 2 percent, Kantrowitz says.

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