An introductory rate, commonly known as a teaser rate, is an interest rate charged to a debtor during the initial stage of a loan. Generally, this interest rate exists for a period of time, such as 12 months, before the rate automatically reverts to a higher, permanent rate.
Teaser rates represent a roll of the dice for many debtors. Some debtors take advantage of an introductory rate by not only borrowing during the introductory period, but repaying the loan as well. For these savvy consumers, they are like gamblers who beat the house. Unfortunately, most debtors don’t have the discipline or the opportunity to repay the loan in full prior to the end of the introductory period. As a result, they face the difficult circumstance of a significant rate hike – often when they’re least prepared for it.
If you’re in bankruptcy because of credit card debt and the teaser rate trap, you may find an ironic and dangerous opportunity when you leave the protection of bankruptcy: the only credit you may be able to find in the first few months or years after bankruptcy may be teaser rate-driven, high interest credit cards. Just like a roll of the dice, these financial instruments aren’t inherently bad or good – they’re just tools at your disposal. What’s most important is that you understand how to use them.
Want to find out the answers to your most pressing questions about bankruptcy? The attorneys and dedicated professionals at Fears Nachawati are prepared to help you. Contact us today for your free consultation.