Glossary

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Teaser Rate
A teaser rate is a low interest rate that is offered as a way to attract borrowers. The teaser rate is usually a short-term rate that eventually increases to a higher interest rate and is applicable for the remainder of the loan. Credit card companies utilize the same strategy when they offer attractively low introductory interest rates in order for consumers to apply for a credit card. Before the introductory interest rate expires, many consumers simply transfer the outstanding credit card balance to a lower rate card. Similarly, borrowers with teaser rate loans are likely to refinance before the higher interest rate takes effect. Borrowers may benefit by obtaining teaser rate loans. They are able to save money and build valuable payment history during the teaser rate phase of the loan.