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Adjustable Rate Loan
A loan where the interest rate fluctuates based on the index rate plus some margin. Many many loans use the Prime Rate as the index for adjustable loans. The lender will add a margin of a few points to the prime rate to determine the rate. When the prime rate moves up or down the rate of your loan will track accordingly. The added margin insures that the lender makes money on the spread between prime and your rate. The size of your margin depends on your credit score and credit history.
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