Current LIBOR Rate Update: July 2020

_{Please Note: New variable rate ELFI loans applied for after 7:00 PM EST on January 7, 2022, will use the Prime Rate of Interest appearing in the Money Market section of the Wall Street Journal (WSJ) as the benchmark rate index. Borrowers who have an existing variable rate ELFI loan(s) that use the London Interbank Offered Rate (LIBOR) as the benchmark rate index will continue to have LIBOR as the benchmark rate index on their loans. ELFI will notify borrowers with existing variable rate loans originated prior to 7:00 PM EST on January 7, 2022, of the expected change from LIBOR to an alternative benchmark rate index in the future.}

This blog provides the most current LIBOR rate data as of July 7, 2020, along with a brief overview of the meaning of LIBOR and how it applies to variable-rate student loans. For more information on how LIBOR affects variable rate loans, read our blog, LIBOR: What It Means for Student Loans.

What is LIBOR?

The London Interbank Offered Rate (LIBOR) is a money market interest rate that is considered to be the standard in the interbank Eurodollar market. In short, it is the rate at which international banks are willing to offer Eurodollar deposits to one another. Many variable rate loans and lines of credit, such as mortgages, credit cards, and student loans, base their interest rates on the LIBOR rate.

How LIBOR Affects Variable Rate Student Loans

If you have variable-rate student loans, changes to the LIBOR impact the interest rate you’ll pay on the loan throughout your repayment. Private student loans, including refinanced student loans, have interest rates that are tied to an index, such as LIBOR. But that’s not the rate you’ll pay. The lender also adds a margin that is based on your credit – the better your credit, the lower the margin. By adding the LIBOR rate to the margin along with any other fees or charges that may be included, you can determine your annual percentage rate (APR), which is the full cost a lender charges you per year for funds expressed as a percentage. Your APR is the actual amount you pay.

LIBOR Maturities

There are seven different maturities for LIBOR, including overnight, one week, one month, two months, three months, six months, and twelve months. The most commonly quoted rate is the three-month U.S. dollar rate. Some student loan companies, including ELFI, adjust their interest rates every quarter based on the three-month LIBOR rate.

Current 1 Month LIBOR Rate – July 2020

As of July 7, 2020, the 1 month LIBOR rate is 0.18%. If the lender sets their margin at 3%, your new rate would be 3.18% (0.18% + 3.00%=3.18%). The chart below displays fluctuations in the 1 month LIBOR rate over time.

(Source: macrotrends.net)

Current 3 Month LIBOR Rate – July 2020

As of July 7, 2020, the 3 month LIBOR rate is 0.27%. If the lender sets their margin at 3%, your new rate would be 3.27% (0.27% + 3.00%=3.27%). The chart below displays fluctuations in the 3 month LIBOR rate over time.

(Source: macrotrends.net)

Current 6 Month LIBOR Rate – July 2020

As of July 7, 2020, the 6 month LIBOR rate is 0.36%. If the lender sets their margin at 3%, your new rate would be 3.36% (0.36% + 3.00%=3.36%). The chart below displays fluctuations in the 6 month LIBOR rate over time.

(Source: macrotrends.net)

Current 1 Year LIBOR Rate – July 2020

As of July 7, 2020, the 1 year LIBOR rate is 0.49%. If the lender sets their margin at 3%, your new rate would be 3.49% (0.49% + 3.00%=3.49%). The chart below displays fluctuations in the 1 year LIBOR rate over time.

(Source: macrotrends.net)

Understanding LIBOR

If you are planning to refinance your student loans or take out a personal loan or line of credit, understanding how the LIBOR rate works can help you choose between a fixed or variable-rate loan. Keep in mind that ELFI has some of the lowest student loan refinancing rates available, and you can prequalify in minutes without affecting your credit score.* Keep up with the ELFI blog for monthly updates on the current 1 month, 3 month, 6 month, and 1 year LIBOR rate data.

*Subject to credit approval. Terms and conditions apply.

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