On what day of the month is the Prime Rate determined for a Management Recruiters loan?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
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Interest Rate. The interest rate for a Loan is a variable rate agreed upon by both parties to the loan. This may be a combination of a number of points above the Prime Rate published by the Wall Street Journal. "Prime Rate" means the prime rate of interest as reported in the Wall Street Journal on the first day of each month in which an installment is due, with the initial rate determined as of the date of the Loan. Each weekly installment under the Note will include interest from the due date of the preceding installment, calculated on the principal balance that remains unpaid after application of the preceding installment. We do not currently charge up-front points or loan origination fees, although we reserve the right to do so in the future.
In 2023, the Prime Rate fluctuated. As of December 15, 2023, the Prime Rate was 7.5%; therefore, if we both agree to a rate that is 3 percentage points above the Prime Rate the initial interest rate for a loan funded near the end of
2023 would have been 10.5%. Assuming the 10.5% rate, and that you borrowed $40,000 during that time and agreed to repay the loan in 12 monthly installments, the "Annual Percentage" for the loan (as defined under the Consumer
Source: Item 10 — FINANCING (FDD pages 31–34)
What This Means (2024 FDD)
According to Management Recruiters's 2024 Franchise Disclosure Document, the Prime Rate used to determine the interest rate for a loan is based on the rate published in The Wall Street Journal on the first day of each month in which an installment is due. The initial rate is determined as of the date of the loan.
This means that the interest rate on a Management Recruiters loan can fluctuate monthly, depending on changes to the Prime Rate. Franchisees need to be aware that their monthly payments could increase or decrease over the term of the loan if the Prime Rate changes. This differs from a fixed-rate loan, where the interest rate remains constant throughout the loan term.
For example, the FDD notes that as of December 15, 2023, the Prime Rate was 7.5%. If a franchisee and Management Recruiters agreed to a rate 3 percentage points above the Prime Rate, the initial interest rate for a loan funded near the end of 2023 would have been 10.5%. If the franchisee borrowed $40,000 and agreed to repay it in 12 monthly installments, the Annual Percentage Rate (APR) would also be 10.5%.