Loan Interest Rates

[austin3515]

Does everyone agree that Prime + 1 for participant loans is officially 4.5% (3.5 + 1)?

I'm just surprised I haven't seen articles or email blasts on this topic yet.

[QDROphile]

Please identify the definition of "Prime"

[austin3515]

Prime as announced by the federal government?
http://www.federalreserve.gov/releases/h15/current/

[masteff]

I agree with 4.5%

[QDROphile]

So that is what is meant when plan terms use "prime" without any other modifier or explanation?

[BG5150]

Does the rate change right away? Or the beginning of the next calendar quarter?

[Bird]

Thanks for posting; I had kind of expected to hear of the prime rate increasing without having to go look for it. I agree that prime plus 1 is 4.5%.

For anyone who doesn't know, the Fed doesn't actually set prime; as per their footnote, it is effectively set by banks and might vary by bank:

Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several base rates used by banks to price short-term business loans.

'tho I imagine in today's world it is uniform.

[austin3515]

Has anyone in the last 6 years heard prime + 1 defined as anything but 4.25? I certainly have not.

[ESOP Guy]

I agree the prime rate is now 3.5% so prime plus 1 is 4.5%.

I also agree with Bird prime is NOT announced by the government but set by banks.

In fact i have seen some documents and/or loan policies specifically say that the plan is using prime as published in the WSJ for any given week.

http://www.bankrate.com/rates/interest-rates/prime-rate.aspx

[My 2 cents]

It is my understanding that the rate published by the Wall Street Journal reflects only the top 10 banks now. When 7 have updated their rates, the WSJ runs with it.

[austin3515]

For us common folk the statement "Prime is 3.5" is more than sufficient to keep me out of trouble!