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A variable-rate mechanism matters more than a forecast
A future market prediction cannot tell a borrower exactly how a contract applies an index or margin.
Reset dates and clauses determine the mechanism that changes the account.
A scenario can show that mechanism using explicit hypothetical inputs. Its educational role is to expose a dependency, without presenting a future rate as known.
Work through the repayment planning guide
Definitions
- Nominal interest rate
- Stated rate used to calculate interest under the agreement; it does not describe every other charge.
- Annual comparison measure
- Annualized disclosure used to compare borrowing costs; its calculation and included charges depend on the jurisdiction and product.