Adjustable rate interest plans are becoming a fact of life
Adjustable rate consumer
loans are coming. In some parts
of the country loans with floating
interest rates have already
arrived. Elsewhere, lenders are
preparing adjustable rate loan
deals that may attract customers
away from traditional fixed rate
loans.
The public has accepted
adjustable rate financing in
mortgages; in the last year,
more than half of the home
mortgages granted carried
adjustable rates. Now, lenders
offer variable rate financing for
cars, home improvements and
personal loans.
Anyone in the market for
borrowed money should
understand how adjustable rate
loans work and how to shop for
favorable terms, according to
the North Carolina Association
for CPAs.
Adjustable rate loans are a
direct outgrowth of bank
deregulation. With Federal law
allowing banks to raise rates on
deposit accounts, the cost of
borrowing has also risen,
explains Edwin Schmelier,
author of a book about variable
rate loans published by the
American Bankers Association.
"Deregulation has msde
interest rates more sensitive to
swings in the economy," says
Schmelzer. "Adjustable rate
loans allow banks to lay some of
the risk of fluctuating rates onto
the shoulders of consumers."
Here's how they work: A
lender can offer you an
adjustable rate loan that is lower
initially than a fixed rate loan
Rice dishes provide
excellent nutrition
Rice is certainly a staple of the
diet in the South. It's high
carbohydrate value provides
energy for the body. By adding
cheese and other dairy products
to rice, a complex carbohydrate
system is created. This provides
an excellent source of protein
without eating meat. So
apparently the two casserole
dishes I am suggesting this week,
are nourishing enough on their
own. Add a salad of fruit or raw
vegetables, or use the casserole
as a side dish with fried chicken
?r roast pork.
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In
Ktlnu folvvrhtn
RICE VERDE
1 c. chopped onions
1/3 c. oil
3 eggs, beaten
1 c. chopped fresh or 3 T. dried
parsley
1 c. grated cheese
2 c. milk
2 c. cooked rice
1 1. Worcestershire sauce
V* t. garlic powder
Saute the onion in oil until
tender. Mix in the remaining
ingredients and bake in a large
casserole dish at 350 degrees for
40 minutes. Serves eight.
SOUR CREAM RICE
2 to 3 c. cooked rice
sprinkle of red pepper
Vi lb. sharp cheese grated
1 c. sour cream
salt to taste
V4 c. dried parsley
PROPERTY SALES
(Tax Trap)
Selling property will require more
care than ever- under the 1984
Tax Act.
The interest rates must meet new
requirements or the IRS will impute
(assign) an interest rate, prior law
hod o fixed 9% simple interest rate
that hod to be charged or the IRS
would impute interest at a 10%
compounded rate. Now the interest
rate will fluctuate with government
obligations.
Sales of business property where
both gains and losses are involved
will now be subject to a com
plicated five-year netting procedure.
Congress was concerned that sales
of property could be alternated
yuear-by-yeor to creot nothing but
losses in one year, and have those
losses treated as ordinary loss, ond
nothing but gains in another year,
with those gains treated as capital
gains.
I the Installment sale method
depreciated property may
leave you paying more income tax
in the year of sole than you octually
receive as down payment. In tax
law there is "depreciation recap
ture" when property is sold. Depen
ding on the type of property sold,
the seller generally is required to
treat some or all of the sales
proceeds as ordinary income rather
than capital gain, in the past when
property was sold on the in
stallment basis, the seller did not
have to report as ordinary income
more dollars than he actually
received durisng the year. The
seller must now recognize all
depreciation fecapture as ordinary
Income in the year of sale, regar
dless of the dollar amount octually
received. You may want a larger
down payment in order to fund your
taxes due In the year of sale.
Check with your tax advisor
before selling properly.
Using l
to self
Timbtrlskc ft Sylws. PA, CPA s - Ml W
King, Edenton. N C 4*2 M?i 110 W
Market. Hertford. N.C. . . . Call us - w*
sonal Corporal*. Estate k Inheritance tax
returns Audits . . . Tax It Financial
Financial Statements
Advisory ... Micro
Combine all ingredients and
pour into a 1V4 qt. baking dish. I
prefer a shallow oblong dish.
Bake at 350 degrees until the
cheese melts. Serves four to six.
because he knows that if
prevailing rates move up, the
financing rate will be adjusted
upward. But that can generate
problems: Deep discounts on
initial payments could attract
borrowers who cannot afford to
pay off a loan if interest rates
increase. In addition, some
lenders have been criticized for
looking only at a borrower's
ability to pay off the loan at the
initial rate and not at an elevated
rate.
When you agree to an
adjustable rate loan, be prepared
to pay more than your original
discounted rate. For instance, a
lender may offer a $10,000 car
loan for 48 months with a 12.5
percent initial finance charge. A
comparable fixed rate loan may
be three points higher. A
borrower with an adjustable rate
loan, however, should calculate
the probable impact on the
pocketbook if the rate shoots up
to 18 percent.
The key to getting the most
favorable adjustable rate loan is
to shop around. Try to find a loan
with lifetime "cap." That would
put limits on your finance rate. A
lifetime cap of five percent on a
loan that begins with a 12 percent
rate, for example, prohobits your
finance rate from going above 17
percent. Annual caps may also
be Included in a loan.
A typical adjustable rate home
improvement loan (or IS years
offers a 12 percent initial finance
rate and is adjusted annually.
Such a loan may be a five percent
lifetime cap and a two percent
annual cap. In addition, the loan
may have a floor on interest
rates which prevents the finance
I.I
rate from falling more than five
percent during the life of the loan
and two percent annually, a
provision that shields the lender
against sharp drops in interest
Rufui Edminsten,
democratic candidate for
governor, was honored at a
reception Sunday afternoon
at the home of Willard and
Christine Copeland in
Winfall. Approximately ISO
turned out to greet the
candidate and enjoy the
Copeland's hospitality.
Pictured are ? left to right ?
the Copeland's son, Tony,
Edminsten, Christine and
Willard Copeland.