Note Rate

Definition - What does Note Rate mean?

A note rate is the interest rate that is quoted and agreed on a loan between a lender and a borrower. The note rate must be clearly defined by law and has to stay within strict regulations that decide how the interest is accrued and at what rate. For instance, compounded interest is usually allowed at a rate which is lower than the highest average note rate due to the fact that it grows more regularly. Once a note rate is determined and confirmed a lender must abide by the terms.

Justipedia explains Note Rate

A borrower can, at times, pay the note rate on the principal sum for a set time if they are having financial trouble meeting the full loan repayment. The note rate is usually tied in some way to the rate which the bank itself borrows money. There are laws that dictate how much additional interest a bank can charge a borrower on top of the rate they commercially borrow.

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