Introductory rate
Encyclopedia
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.
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 transfer
s, and they may or may not apply to cash advance
s.
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.
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
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
rate charged to a customer during the initial stages of a loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
. The rate, which can be as low as 0%, is not permanent. It has an expiration after a specified period of time.
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 transfer
Balance transfer
A balance transfer is the transfer of the balance in an account to another account, often held at another institution.-Types of balance transfers:...
s, and they may or may not apply to cash advance
Cash advance
A cash advance is a service provided by most credit card and charge card issuers. The service allows cardholders to withdraw cash, either through an ATM or over the counter at a bank or other financial agency, up to a certain limit...
s.
In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, 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.
When determining qualification for a loan
Sometimes, due to an introductory rate, an applicant can get approved for a mortgageMortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
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