The Banks Loan Rates

There is really no standard loan rate, it greatly depends on external circumstances (financial atmosphere), your financial situation, type of loan, location and many other factors.

A bank’s loan rate can also be difficult to understand. During what was called the subprime mortgage bubble many home buyers got sucked into a loan without really understanding what they were signing. I am not excusing the buyers, however, for being reckless and irresponsible with their finances.

Many buyers signed a loan with a ‘teaser’ rate with in an adjustable rate mortgage. What this mean is they were taking out a loan with payments that changed over time. The bank’s loan payments were small for the first couple years making the property seem more affordable but later adjusted to cost hundreds more per month, literally bankrupting the careless buyers.

This is a classic example of why a fixed loan rate is always better than an adjustable loan rate. Adjustable loan rates are always initially cheaper whereas fixed rates are initiated at a higher rate. The wonderful thing about a fixed rate loan is that you always know exactly what you are paying and nobody can change it or raise it. With the adjustable rate loan it can start as low as 1% when credit is cheap but climb as high as the central banks decide to raise rates. In this case you have no control and no way of knowing what your future expenses may be. This does not make for good financial planning, it’s a recipe for financial disaster.

So when choosing a loan rate always take into account what you can afford over the full term of the loan and select the best fixed rate you can find accordingly.