BY DALE VERMILLION
June 24, 2009
A couple of key tips regarding interest rates:
It's Not the Rate You Need to Know
When applying for a loan, never ask for just the "interest rate", but always ask for the APR. The APR is inclusive of fees and cost and is the ACTUAL cost for the loan on an annual percentage basis (if quoted accurately). The interest rate alone does not. Therefore, you may get quoted 5.00% interest, but after fees and costs have an APR of 5.50%.
Check the APR
Once quoted an APR, always check it against a mortgage calculator (these are available free online at places like bankrate.com) to be sure it is accurate. All you need is the loan amount, payment and term to check. If the loan amount, payment and term you put in do not match the APR you were quoted, then you were misquoted and need to find out the truth.
The Low Rate You See is Not Necessarily What You Get
Don't be fooled - the low rates you see advertised are for the very best qualified. This means 720 to 740 FICO or higher in today's market, with verifiable income, maximum 80% loan-to-value and low debt ratios. As your credit score drops and your equity usage or debt ratio increases, your rate most likely will too! Also, there are lots of additional "premiums" for things like cash out, condominiums and the like.