Question: I’m sorry this worked out so badly for you.
> Unfortunately, those are the chances you take. Most banks will tie the > rate to their prime lending rate, which is itself tied to something like > T-bills. I wouldn’t consider any loan agreement where this was not the > case.
> I had a adjustable rate car loan, which started off about 2 1/2% lower > than a fixed rate loan. In addition, there was a free payment at the > end. I wound up averaging about 3 3/4% rather than the 9% I would have > paid on a fixed rate loan. But I guessed right, and rates went down > shortly after I made the loan, and didn’t rise again until I had only 3 > payments left.
> If you guess wrong, and rates rise too much too soon, it can cost you. > This decision depends a lot on how much risk you’re willing to take.
> It’s not the wrong decision for everyone.
Answer: Car loans are so short term and for such a “small” (comparativly) amount, even a large increase won’t hurt so much as a 30 year loan for over $100,000.
Example. $100,000 30 year loan at 6.8% = 651.84 a month $100,000…………..at 7.3% = 685.47 a month $100,000……………..7.8% = 719.79 a month Just a 1% increase puts a crimp in a frugal budget. When the FEDS let interest rate go higher—–watch out.
Home loan interest rate are currently below 7%. Do any of you who have ARMs have payments that went way down? They should have.
Other cirucumstance than the ARM cost us our house, but that increase of of almost $400 a month sure didn’t help.
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