How is the interest rate for a Management Recruiters loan determined?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
l as in certain of your other assets.
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 Credit Protection Act) would be 10.5%.
Your Potential Liability on Default. Under the Note, if you fail to pay any installment within 30 days after its due date, we may declare the entire indebtedness to be due and payable immediately. After the default, the interest rate on the unpaid principal balance will increase to 18% per annum (
Source: Item 10 — FINANCING (FDD pages 31–34)
What This Means (2024 FDD)
According to Management Recruiters's 2024 Franchise Disclosure Document, the interest rate for a loan is variable and is determined through an agreement between Management Recruiters and the franchisee. The interest rate may be a certain number of percentage points above the Prime Rate published in the Wall Street Journal. The Prime Rate is determined on the first day of each month when an installment is due, with the initial rate set on the loan date.
For example, as of December 15, 2023, the Prime Rate was 7.5%. If Management Recruiters and a franchisee 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 a franchisee borrowed $40,000 at this rate and agreed to repay it in 12 monthly installments, the Annual Percentage Rate (APR) would also be 10.5%.
If a franchisee fails to pay any installment within 30 days of the due date, Management Recruiters can declare the entire loan amount immediately due and payable. After this default, the interest rate on the unpaid principal balance will increase to 18% per annum, but not exceeding the maximum legal rate. Management Recruiters does not currently charge up-front points or loan origination fees but reserves the right to do so in the future.