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Author Topic: Loans: LIBOR vs. PRIME  (Read 1227 times)

jas9999

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Loans: LIBOR vs. PRIME
« on: June 23, 2004, 03:47:12 PM »
I know there are some people here with experience in the finance industry. Is it better, in your opinion, to take a loan pegged to LIBOR (3 month), or Prime? Recently, the LIBOR has been increasing, but I thought it was the more stable over the long term.

I'm looking at Citibank vs. AccessGroup. Right now, the LIBOR rate is a little better, but it's less than .1% difference.

Any thoughts from people who deal with this stuff would be appreciated. I'm not a finance moron, I'd like to think, but I don't follow historic trends and leading indicators...

cc1t

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Re: Loans: LIBOR vs. PRIME
« Reply #1 on: June 24, 2004, 06:41:13 PM »
Rough definition:
Prime is based on the fed govt, they set it to try to help the flow of the economy
Libor is set by a group of English banks, as far as I can see, it's to help control the pound.

That being said, Libor flucuates a lot more (but in small increments) then prime, it basically changes from month to month (but traditionally doesn't deviate from prime such as libor is high, prime is low), prime on the other hand, is more stagnant, it's been at 4.00 for the past couple years, but there's talk of it getting moved up this summer with the assumed upswing in the economy.  Either one is a gamble, noone knows where the economy is going.  It would be better probably to get a 6% fixed then a 4-4.5% with variables, unfortunatley ir seems like NO lenders are offering fixed right now, probably because of the expected upswing.  That being said, I'm doing citi who bases theirs on prime since I'm more in touch with the US market then the English market, instead of access group (that and they offered me no origination fee unlike access).  It won't be that big of a deal with which you go to, they're both variables, and no matter how much you research the markets to see which has the best shot at going down, of course noone can predict it.  Your best bet, is to get the lowest rate, and then when the economy is right and lendors are offering good fixed rates, consolidate into it immediatley!

Either way you're gambling.

jas9999

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Re: Loans: LIBOR vs. PRIME
« Reply #2 on: June 28, 2004, 12:40:24 PM »
thanks. i ended up taking accessgroup, because i qualified for the better rate with no finance fees. i might hedge that by taking out citibank for next year, but we'll have to see where the rates are in 12 months.

southerncomfort

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Re: Loans: LIBOR vs. PRIME
« Reply #3 on: January 14, 2005, 09:08:19 PM »
And what about the 91 day Treasury bill rate?
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A.J

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Re: Loans: LIBOR vs. PRIME
« Reply #4 on: January 14, 2005, 09:18:05 PM »
Uh no, the prime rate is not controlled by the government.  It is the rate charged by banks to their most credit worthy customers. 

LIBOR, the London Inter Bank Offer Rate, is the rate at which European banks loan to one another and isnt necessarily related to any government monetary policy either.

Just thought I'd clarify.

Btw- How in the hell are you getting the opportunity to borrow at these rates?

taterstol

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Re: Loans: LIBOR vs. PRIME
« Reply #5 on: January 14, 2005, 10:01:20 PM »
Uh no, the prime rate is not controlled by the government.  It is the rate charged by banks to their most credit worthy customers. 

LIBOR, the London Inter Bank Offer Rate, is the rate at which European banks loan to one another and isnt necessarily related to any government monetary policy either.

Just thought I'd clarify.

Btw- How in the hell are you getting the opportunity to borrow at these rates?

Access Group bases its law school loan interest rates on LIBOR. My loan is LIBOR-based. I always thought it was kinda strange, but my interest rate is lower right now than it would have been had it been based on Prime.