Blended Rates Explained
Blended rates may favor those who are outsourcing their business, but there is still reason to know if this is the right option for your business. By the word itself, imagine your rates inside a blender. No matter how low or high your resources cost, you’ll end up with one average rate in your glass. In making loans, it is combining two or more interest rates that will turn out to produce better rates. Surely, blended rates are great for refinancing your loan, so you can get a better rate than what was originally applied for. The interest rate on your extra funds are given at a rate lesser than that of the current market.
Blended Rates for Lenders
Financial institutions consider blended rates as a win-win solution. They get the benefit from mixing the old and new loan, averaging the interest rate, than from trying to roll the old one into new loans. Debtors find it advantageous to offer blended rates while having the borrower’s assets or properties in hand ( collateral ). Offering a blended rate usually makes the borrower shop around for better deals. Profit can also be earned on the lender’s side through new processing fees needed for the refinancing.
Blended Rates for Borrowers
Remember that blended rates will give more responsibility to a borrower, since there will be payments on two or more interest rates over the duration of the mortgage. With blended rates, you will be able to determine which interest rate will result into the lowest monthly fee. There are many websites offering free blended rates calculation, and you may simply get the average of your mortgages to come up with the blended rate. You can even ask your broker to do the calculation for you. Blended rates are perfect for combination loans that will combine your monthly payment, or blend them. For example, if you have a good credit rating and the bank sees you fit for a blended rate, you can refinance your home mortgage at a blended rate of 8%, given that your old loan has a 7% interest rate and your new loan has 9%.
Blended Rates for Outsourced Business
Blended rates for those who are doing outsourcing will simply mean computing the monthly or quarterly dues by making an average of the hourly rates of the people working for a team. This can exclude those working on the top. This model is best for large-scale businesses. If you’re not, it is wise to go for a fixed price project to lessen the risk of having the job outsourced. Blended rates can make cash flow predictions better, which will mean getting more for less. The downside is that quality of work or product may decrease when the company starts replacing senior level workers with inexperienced personnel. This will greatly affect the vendor-customer relationship an outsourced business have, where small to mid-range firms can truly suffer. Blended rates are also
great for cost-cutting, where a business will pay for the completion of the entire project, and not for the hours spent by individuals working on it.
When it comes to mortgage, blended rates will always be somewhere in between, not lower than your first loan and not higher than the new loan. This option is better when you want to avoid huge loans. By combining your loans, you widen your option and you help lower your interest rate even by a single percent.
RESOURCES:
Financial Swagger. “ ENTmoney’s Word of The Day: Blended Rate. “ July2009. ENT Money.com.
http://www.entmoney.com/2009/07/23/entmoneys-word-of-the-day-blended-rate/
Vens Software International. “ Blended Rates: Pros and Cons. “ February 2009. ( Remi )
http://www.it-outsourcing-china.hyveup.tv/2009/02/blended-rates-pros-and-cons/
Wise Geek. “ What is a Blended Rate. “ 2003-2009.
http://www.wisegeek.com/what-is-a-blended-rate.htm
Mc Lane, Nico. “ The Joy and the Sorrow of a Blended Rate. “ April 2009.
http://nicomclane.com/2009/04/16/the-joy-and-the-sorrow-of-a-blended-rate-fixed-rate-development-concepts/
LenderMark.com. “ Blended Rates. “ 2005-2008.
http://www.lendermark.com/blended_rates.htm
