Loanfactz Definitions

Introductory Rate

Also known as a teaser rate or intro rate, is a very low discounted * interest rate, for a very short period of time, on an * adjustable rate mortgage or * credit card offered by the lender to encourage customers to switch credit cards or lenders. The introductory rate may increase dramatically after a month or so. Make sure you understand the terms of the offer. That low introductory rate may only apply to balances you transfer to your credit card from other loans or cards you have and not to any new purchases. If your credit card has an introductory rate, you'll see both that rate and the rate that will apply after the introductory rate expires.

Glossary For This Page
(In Alphabetical Order)

* Adjustable Rate Mortgage (ARM)
Also known as a variable rate loan, usually offers a lower initial rate than fixed rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR (London Interbank Offered Rate) index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, your monthly payments will increase and when the interest rate on an ARM decreases, your monthly payments will be lower. Most ARMs have caps.

* Credit Card
A credit card, also called a charge card, is a plastic card issued to you by a bank or business. It is a form of borrowing that authorizes you to buy goods or services on credit and pay for them later. Payment is usually made monthly and you can either pay in full or pay a minimum payment with interest charged on any unpaid balance. You must fill out an application and be approved for the card. There is a credit limit as to how much you can purchase. Some credit cards charge an annual fee. Credit cards have high interest rates, so be sure to compare terms and fees before you agree to open a credit card.

* Interest Rate
The percentage of a sum of money charged to the borrower by the lender for borrowing the lender's money.

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