What is the Definition of Headline Rate?
Headline rate is a term used to describe the rate of interest or return on an investment, loan, or other financial product. It is the rate of interest that is prominently featured or advertised in the product’s promotional material, such as a website, brochure, or advertisement.
Headline rate is usually the most attractive rate offered by the financial institution, and it is often the rate that is used to attract customers. However, the actual rate of return or interest applied to the customer’s account may be lower than the headline rate. This is because the headline rate often only applies to certain conditions, such as a minimum deposit or a certain term length.
For example, a loan may advertise a headline rate of 4.5%. This rate may only apply to customers who have excellent credit scores and who take out the loan for a specific term length. Other customers, such as those with lower credit scores, may receive a lower rate of interest.
It is important to note that the headline rate is not always the same as the annual percentage rate (APR). The APR is the rate of interest that is actually applied to the customer’s account and is the rate that will be used to calculate the total cost of the loan.
Headline rate is an important concept for anyone considering taking out a loan or other financial product. It is important to understand the conditions that must be met in order to receive the headline rate, and to be aware that the actual rate of interest applied to the account may be lower than the headline rate.