Banks all round the world have transformed now-a-days in making the loans process easier. Both the banks and the customers are benefitted through this process. Banks are making good profits by the way of rate of interest and the public are getting access to money when required. Banks have taken a lot of steps in making the customer comfortable in taking the loans and fixing the rate of interest. One such step is the interest rate swap process.
Interest rate swap process is a contract that is made separately with the loan agreement. In this type, the customer can choose to swap the type of interest payment from one type to another type like a floating payment interest type can be changed to fixed interest rate payment.
Problems mostly arise in case of floating interest rate. Customers generally are more at the profit side and stable when floating interest rate is chosen. Floating interest rates basically increase or decrease. Base rates are also directly dependent on the floating interest rates. If the floating interest rate increases, base rates also increase. The customer in turn receives an amount from the bank which can effectively counterbalance the increased loan repayment. When the floating interest rate falls, then the customer have to pay an additional amount to the bank. The payment terms are based on the swap terms. The cost to the customer generally will be stable.
The customer can be cheated by the bank to increase their profits by rate swap mis selling. The customer has no control over the swap prices. But banks can look at the swap market and know the prices and misguide the customer for higher swap rates. The banks can make profits by rate swap mis-selling, these practices by the bank have to be strictly reviewed by the concerned authorities and the malpractices have to be curbed.Banks all round the world have transformed now-a-days in making the loans process easier. Both the banks and the customers are benefitted through this process. Banks are making good profits by the way of rate of interest and the public are getting access to money when required. Banks have taken a lot of steps in making the customer comfortable in taking the loans and fixing the rate of interest. One such step is the interest rate swap process.
Interest rate swap process is a contract that is made separately with the loan agreement. In this type, the customer can choose to swap the type of interest payment from one type to another type like a floating payment interest type can be changed to fixed interest rate payment.
Problems mostly arise in case of floating interest rate. Customers generally are more at the profit side and stable when floating interest rate is chosen. Floating interest rates basically increase or decrease. Base rates are also directly dependent on the floating interest rates. If the floating interest rate increases, base rates also increase. The customer in turn receives an amount from the bank which can effectively counterbalance the increased loan repayment. When the floating interest rate falls, then the customer have to pay an additional amount to the bank. The payment terms are based on the swap terms. The cost to the customer generally will be stable.
The customer can be cheated by the bank to increase their profits by rate swap mis selling. The customer has no control over the swap prices. But banks can look at the swap market and know the prices and misguide the customer for higher swap rates. The banks can make profits by rate swap mis-selling, these practices by the bank have to be strictly reviewed by the concerned authorities and the malpractices have to be curbed.
For more information on swap mis selling, check out the info available online; these will help you learn to find the interest rate swap mis selling!
Orignal From: Rate Swap Mis-Selling - A Malpractice According To A Few Banks
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