Articles
How Prime Rate Affects your Loan Fees
by APSense News Release AdminIf you own a credit card, you
may be familiar with the term “prime rate” but do you know how it affects you?
What is Prime Rate?
The
prime rate is the interest rate that most banks charge their most creditworthy
customers. But whether you are one of their best borrowers or not, it can
greatly affect your credit card or other loan fees. Here’s why.
Most
banks set their APR (Annual Percentage Rate) on the prime rate. You may have
noticed in your APR details something like “10% + the prime rate”. This means
that your loan interest rate will be 10% plus the current prime rate. For
instance, if the prime rate today is 5%, you’ll have a 15% interest rate.
What Causes the Prime Rate to Fluctuate?
The
prime rate fluctuates depending on the Federal Funds Rate (FFR), the interest
rates set by Federal Reserve for banks. Financial institutions like banks are
legally obliged to have a reserved fund for their customers to withdraw. In the
instances when a bank doesn’t have enough reserved funds, it can borrow money
from another bank. In return, the borrower bank will be charged the federal
fund rate.
How Often Does the Prime Rate Fluctuates?
The
prime rate increase or decrease anytime. As mentioned, depending on the Federal
Funds Rate. If the FFR increases, the prime rate may also increase. If it goes
down, then a decrease can be expected. In recent years, the Prime Rate plays
between 3.25 to 5.50%.
Here’s How the Prime Rate Fluctuates in the Recent Years
2022
July
28, 2022 – 5.50%
June
16, 2022 – 4.75%
May
5, 2022 – 4%
March
17, 2022 – 3.50%
2021
None
2020
March
17, 2020 – 3.25%
March
04, 2020 – 4.25%
2019
October
31, 2019 – 4.75%
October
19, 2019 – 5%
August
01, 2019 – 5.25%
2018
December
20, 2018 – 5.50%
September
27, 2018 – 5.25%
June
14, 2018 – 5%
March
22, 2018 – 4.75%
2017
December
14, 2017 – 4.50%
June
15, 2017 – 4.25%
March
16, 2017 – 4%
How Does the Prime Rate Affect Loan Fees?
The
prime rate is the baseline of banks on what interest rate to charge their
borrowers. Not just credit card holders and not only their best customers. Most
of the time, the interest rates that financial institutions charge on loans are
higher than the set prime rate. Unless they see you as worthy to be charged
with the prime rate, the lowest interest rate banks can charge on a customer.
Note
that interest rates on your loans may depend on your credit score, income,
savings, and the length of your payment terms.
How to get the Lowest Interest Rates on Loans?
The
easiest way to get the lowest interest rate is by having a good credit score.
You can maintain it in good standing by paying your loans on time. The lower
your credit score is, the higher the interest rate you’ll be charged. This is
because banks see you as a high-risk borrower. Creditors inspect the credit
history of a borrower before approving a loan to check their credibility. Thus,
one way to get creditors' trust is by building and maintaining good credit.
How to Improve Credit?
Life
can be tough and there are inevitable things that may lead you to not pay your
loans on time which resulted in a negative effect on your credit records. For
instance, an illness, bankruptcy, losing a job, and divorce to mention a few.
Fortunately, you can always improve your credit. You may seek a credit repair
business to help you out. They are experts in improving credit. But you need to
be careful when choosing a credit repair service provider as there are many frauds.
It’s important to know your rights and read about the credit repair
organization act to avoid being scammed.
Another
way to improve credit is doing it on your own. It’s not that hard especially if
you have credit
repair software to make
the process easier. This type of software helps you easily obtain and review
your credit reports, identify errors that needed to be disputed, and generate
dispute letters to be sent to creditors and credit bureaus. Which are the most
important steps to fixing your credit?
Once you learn how to fix your credit, you’ll realize it’s not that hard. And if you have credit repair software, you can even build your own credit repair business. This type of business can be done at home. So, you’ll also have another source of income while helping others improve their financial situation.
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Created on Aug 19th 2022 06:17. Viewed 92 times.
