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Ride The Line

. . . because getting a fixed-rate loan might not be the best fix.
May 1, 2001
URL: http://www.entrepreneur.com/article/39570

Q: With the recent drop in interest rates, is now a good time to refinance my floating-rate loan?

A: Probably not. It's possible to get a fixed-rate loan, but not all lenders offer that option. If yours does, the initial rate on the fixed-rate loan will likely be higher than that on the floating-rate loan. Also, to avoid keeping their money tied up for long periods of time, lenders usually make fixed-rate loans at shorter terms than when they float with the current rates.

Obviously, most borrowers would prefer knowing they have a fixed payment for a determined number of years to guessing what their payment might be every month. In a falling-rate environment, however, riding the line downward is probably the more sensible option. Once the rates level off, then go talk to your lender. And if he or she agrees to fix the rate, make sure you can deal with the possibility of a higher initial rate.


Doug Hood is co-founder of Rainmaker Capital Corp., a capital acquisition consulting company in Cartersville, Georgia. Co-founder Marilea S. Hood contributed to this article. Send questions or anecdotes via e-mail to doughood@rainmakercapital.com or call (770) 382-8773.