Classic vs Fixed Rate LeverageLine Options
Two years ago, our variable rate “classic” LeverageLine was based on a base rate — determined by the size of the line, larger line=lower base rate — plus 30-day LIBOR, which in 2016 was, due to the relatively lethargic economy, only about .27. Thus, our LeverageLine securities-based line of credit on a $500,000 line, for example, came in at a base of about 2.7 and an addition .27 for LIBOR for a 2.97% credit line. That was very competitive, and we heard no complaints from our clients, ever.
Today in our booming economy 30-day LIBOR has climbed to 2.07% or thereabout, a huge increase. That same line that would have had an interest rate of 2.97 would now come to 4.7% or more. The days of low variable rate loans are apparently no longer with us.
We at A. B. Nicholas went to work with our lenders. How can we offer our clients SOME way to save on interest? Was there any practical, sound way to lower the interest rates on our LeverageLines?
Today we are happy to announced our Fixed-Rate LeverageLine that allows our clients to have
Our Fixed Rate LeverageLines in two flavors, no prepayment and P&I:
Low Fixed-Rate But Non-Prepayable Option
1) A loan where the principal is non prepayable until the loan maturity date, at which time it rolls (at no cost) into our standard, variable-rate classic Leverageline (at base-rate + 30-day-LIBOR rates) and you can pay the principal off whenever you like, in any increments you like or even all at once. The rates for a line of credit of ANY size (credit lines over $100,000):
- For two year term, a flat 4.3% fixed on the outstanding principal.
- For a three year term, a flat 4.4% fixed on the outstanding principal.
- For a four year term, a flat 4.45% fixed on the outstanding principal.
- Four a five year term, a flat 5% fixed on the outstanding principal.
A “breakage fee” will apply if you opt to try to pay off the principal early. Please inquire at the time you apply for the exact cost of the breakage, which will revert your loan to a full standard variable rate LeverageLine and you’ll no longer be able to avail these special slow discounted fixed rates should you seek to pay off the principal early. As a rule, you may wish to choose this option if you do not intend to repay the principal during the loan term, but rather after the fixed loan term. Or, you might opt for Option 2, below:
Principal and Interest Payable, But Higher Fixed Interest Rate Option
2) A Special Five-Year Term loan with a fixed rate and Principal + Interest, with the loan amortizing over time as you make the P & I interest rates and pay a little principal each time, bringing the debt down and lowering your monthly payments as you gradually pay it off. This one is much like a car loan, and you CAN pay it off at any time. However the above rate table does not apply. You can expect your rate to be closer to a standard, Classic LeverageLine except that it will not be a variable rate, but a fixed amount. A typical, say, $250,000 line of credit might have a rate closer to 6.5% but it is fixed for the full five years of the loan, and you CAN pay it back in installments like a standard car loan.
Our Classic LeverageLine
3) As always, our standard/Classic LeverageLine, with all the features you’ve read in our FAQ and our descriptive pages, is available too. The loan still makes good economic sense if your loan is $500K and up, as the base rate will usually be plenty low enough to offset the 30-Day LIBOR. It still allows prepayment anytime you like, has no maturity date like a credit card, and is well suited to use in business or real estate applications.
Interested? Fill out a No-Obligation/No Cost Quote Request and tell us in the notes box what kind of LeverageLine interests you — our Classic, or one of our two new Fixed LeverageLines. We would love to serve you.
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