If you finance a fire truck, you'll spend between 10% and 50% of the truck price on financing cost.What can you do to make sure you're not wasting any money unnecessarily?
Knowing the interest rate options can cost you...or save you
You'll see different options from different banks. What should you know and how should you choose?
Fixed Rate vs. Variable Rate: Banks will offer lower variable rates and higher fixed rates. The reason is that the bank is putting the risk of future interest rate changes onto your shoulders. If you guess wrong, the cost of borrowing will increase. My advice: Leave the interest rate risk to the professionals and choose the fixed rate option.
Rate resets: This is another version of the variable rate. The rate is fixed for a period and then resets at the future rate. Again, when you choose a rate reset, your cost may increase and change what you think you are paying for borrowing.
You can not calculate the cost of borrowing when you agree to future changes in the interest rate. By not knowing, you can waste money.
John R. Hill