Introductory rate

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An introductory rate is an interest rate charged to a customer during the initial stages of a loan. The rate, which can be as low as 0%, is not permanent. It has an expiration after a specified period of time[1].

The purpose of the introductory rate is to market the loan to customers and to seem attractive. They are commonly used for the application of balance transfers, and they may or may not apply to cash advances[2].

In the United States, the Fair Credit and Charge Card Disclosure Act (FCCCDA) requires that the rate that will occur following the expiration of the introductory rate be clearly disclosed to the customer[3].

[edit] When determining qualification for a loan

Sometimes, due to an introductory rate, an applicant can get approved for a mortgage based on payment history, when that applicant may have had a good payment history on the introductory rate, but may not be able to maintain such payments once this rate expires and rises[4]

[edit] See also

[edit] References

  1. ^ The complete idiot's guide to managing your money By Robert K. Heady, Christy Heady, Hugo Ottolenghi, page 235 [1]
  2. ^ Truth in lending By Ralph J. Rohner, Frederick H. Miller, Robert A. Cook, Alvin C. Harrell, Elizabeth Huber, American Bar Association. Section of Business Law, page 510 [2]
  3. ^ Personal Finance By E. Thomas Garman, Raymond Forgue, page 188
  4. ^ California Real Estate Practice By William H. Pivar, Lowell Anderson, Daniel S. Otto, page 354 [3]

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