Why do depository institutions prefer to make variable rate loans instead of fixed rate loans?
What kind of borrowers do you think would prefer variable rate to fixed rate loans?
A higher proportion of variable rate loans tend to be made when all interest rates are higher than normal. Why might this be the case?
Tags: depository, Fixed, instead, institutions, Loans, prefer, Rate, variable
Banks will maximize profits any way they can. An adjustable rate means they will always make the same maximum profit from a loan, no matter what the Federal interest rates do.
Borrowers who prefer variable rates tend to be bad with money and easily sold on , variable rates. It is the loan officer’s job to sell you the highest interest rate possible.
People who are smart with money don’t borrow when rates are high.