LIBOR - An Interest Rate Alternative

If you are concerned about the volatility of the current interest rate markets one alternative is to tie your loan to LIBOR (London Inter-Bank Offered Rate). Generally a bank will charge a borrower 2.25% premium over that rate in offering a loan depending on the borrowers credit worthiness. Over the course of the last 10 years the this rate has been pretty close to the prime interest rate that many borrowers have used.

So what's the point in considering LIBOR? In my opinion, LIBOR has tended to be a more stable rate throughout history. It tends not to have the peaks and valleys of our prime interest rate and may be a good vehicle for a borrower who is concerned about interest rates rising.

Mike