Help with base rates and interest rates on a Line of Credit

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May 18th, 2015 12:47 pm

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May 6th, 2015 6:47 pm

RaiderX [OP]: Sr. Member; Dec 24, 2011; 633 posts; 1406 upvotes; East, Canada

May 6th, 2015 6:47 pm

Help with base rates and interest rates on a Line of Credit

Hello. So I applied to BMO for a line of credit. I was offered and accepted an interest rate of 8.85% - though I have not yet signed on the line. I was told that this was the best rate I could get, and was the Canada "base rate" plus 3%.

Can someone give me some advice on this? I'm lost.

- What is this "base rate?" Is this the same as "prime" rate?
- How do I find the base rate? I've tried Google but nothing I see listed is 5.85%.
- Is base + 3% a good rate for a LOC?

22 replies

May 6th, 2015 6:55 pm

booblehead: Deal Expert; Jul 30, 2007; 32073 posts; 19287 upvotes; Toronto

May 6th, 2015 6:55 pm

That's crazy high

My unsecured loc with td is p + 2%

Base is always prime rate

On occasion, i get td's invitation for using the loc at prime rate

May 6th, 2015 6:57 pm

RaiderX [OP]: Sr. Member; Dec 24, 2011; 633 posts; 1406 upvotes; East, Canada

May 6th, 2015 6:57 pm

So why did she tell me that the base lending rate is 5.85%? I was taking her on her word.

Where can I view the rate? And is it uniform for all banks?

May 6th, 2015 7:01 pm

booblehead: Deal Expert; Jul 30, 2007; 32073 posts; 19287 upvotes; Toronto

May 6th, 2015 7:01 pm

Yup. Bank will post the current prime rate at their website

I say try another bank. If you have good credit score, i think p+2 or p+3 would be good

Prime rate is the same for all banks

May 6th, 2015 7:04 pm

RaiderX [OP]: Sr. Member; Dec 24, 2011; 633 posts; 1406 upvotes; East, Canada

May 6th, 2015 7:04 pm

Well she told me it is their rate, +3%. So that part doesn't seem so bad. But where is she getting this 5.85% base rate from then? She assured me that is the current rate.

May 6th, 2015 7:05 pm

604nation: Deal Addict; Aug 31, 2014; 1505 posts; 560 upvotes; YVR, BC

May 6th, 2015 7:05 pm

did you apply in branch or online?

May 6th, 2015 7:09 pm

booblehead: Deal Expert; Jul 30, 2007; 32073 posts; 19287 upvotes; Toronto

May 6th, 2015 7:09 pm

RaiderX wrote: ↑Well she told me it is their rate, +3%. So that part doesn't seem so bad. But where is she getting this 5.85% base rate from then? She assured me that is the current rate.

So it is really quoted for p + 6%. Thats loan sharking rate .. Per se

May 6th, 2015 7:12 pm

RaiderX [OP]: Sr. Member; Dec 24, 2011; 633 posts; 1406 upvotes; East, Canada

May 6th, 2015 7:12 pm

604nation wrote: ↑did you apply in branch or online?

I originally went in branch, where they told me to apply online.

Where can I view BMO's prime rate?

May 6th, 2015 7:26 pm

booblehead: Deal Expert; Jul 30, 2007; 32073 posts; 19287 upvotes; Toronto

May 6th, 2015 7:26 pm

Bmo.ca

Under loans and loc

Right hand side

Prime is 2.85%

May 6th, 2015 7:27 pm

RaiderX [OP]: Sr. Member; Dec 24, 2011; 633 posts; 1406 upvotes; East, Canada

May 6th, 2015 7:27 pm

I'm on the phone now and the rep has told me prime rate or base rate, is 2.85%....

The person on the phone says the base rate is prime rate plus BMO's lending rate. So 2.85% plus BMO's lending rate of 3%. Plus an additional 3%, called a "valiancy rate". Am I being ripped off?

May 6th, 2015 7:28 pm

booblehead: Deal Expert; Jul 30, 2007; 32073 posts; 19287 upvotes; Toronto

May 6th, 2015 7:28 pm

Yup

Move on to others

May 6th, 2015 7:33 pm

604nation: Deal Addict; Aug 31, 2014; 1505 posts; 560 upvotes; YVR, BC

May 6th, 2015 7:33 pm

if you have a credit score over 700

should be able to get 2.85% + 2-3%

let them know this if they refuse, move on to RBC, CIBC and Scotiabank - these reps you deal with are trying to make the bank money and get bonuses, having people sign up for products for a higher % rate makes the bank money right?

if your credit score is good or better, you are being treat by BMO as having fair credit.........

MBNA Tru Line offers 9% for their low rate mastercard!

May 6th, 2015 8:22 pm

RaiderX [OP]: Sr. Member; Dec 24, 2011; 633 posts; 1406 upvotes; East, Canada

May 6th, 2015 8:22 pm

My score is just under 700. Should be over that soon once a near 6 year old payed debt to Rogers finally removes itself. All my credit cards are paid as agreed, no missed payments. BMO customer for 7 years. Pretty pissed off just now with what they offered me. The sales person presented it as prime + 3 % when really it's prime + 6%.

For the record, they first offered me 10.85% then came back with 8.85% total the next day.

Not a happy customer tonight.

May 6th, 2015 8:40 pm

604nation: Deal Addict; Aug 31, 2014; 1505 posts; 560 upvotes; YVR, BC

May 6th, 2015 8:40 pm

I think with a under 700 score the best you would get is high 6% or low 7%.......depends on how hard you negotiate and the leverage you have, I know people with pretty good scores with prime + 3.85/4%

May 6th, 2015 9:11 pm

Cerium398: Sr. Member; Apr 28, 2014; 675 posts; 184 upvotes; Oakville, ON

May 6th, 2015 9:11 pm

RaiderX wrote: ↑Hello. So I applied to BMO for a line of credit. I was offered and accepted an interest rate of 8.85% - though I have not yet signed on the line. I was told that this was the best rate I could get, and was the Canada "base rate" plus 3%.

Can someone give me some advice on this? I'm lost.

- What is this "base rate?" Is this the same as "prime" rate?
- How do I find the base rate? I've tried Google but nothing I see listed is 5.85%.
- Is base + 3% a good rate for a LOC?

Former BMO employee here with Direct Banking...although I did not do anything regarding lending

If you read the Paperwork, this is how the Line of Credit is Priced: Base Rate + or - Variance

Base Rate = BMO Prime Rate (currently 2.85) + Percentage Rate (currently 3.00 - BMO can change this at any time)

Base Rate = 5.85

All Line of Credit pricing is + or - this number

So, a Line of Credit that is 4.10% is not expressed as Prime + 1.25 (2.85 + 1.25 = 4.10)

It is expressed as Base - 1.75 (5.85 - 1.75 = 4.10)

So, therefore:

Base Rate is NOT the same as Prime Rate...Base Rate at BMO is BMO Prime + 3.00

So, you are being Priced at Base Rate + 3.00 which is 8.85

Hard to say whether or not it is a good rate...depends on your personal credit score plus financials

Apply with someone else and see what rate they give you....oh, and whichever Bank you go with, they will do a hard upsell on Insurance for the PLOC; I recommend you decline it

Just so you know, bro...the BMO Line of Credit is essentially a MasterCard. But BMO will not actually issue a MasterCard access card on it for customers anymore unless you go to the branch and demand it. Without MasterCard access on your PLOC, you would have to access it by going into the branch, doing a transfer on Online Banking to chequing or through a chequebook...and BMO charges for the cheques.

CIBC and TD do their Line of Credits differently; there is a loophole people use to turn a Line of Credit at those Banks into a free chequing account. And the cheques are complimentary.

+1

May 6th, 2015 9:17 pm

booblehead: Deal Expert; Jul 30, 2007; 32073 posts; 19287 upvotes; Toronto

May 6th, 2015 9:17 pm

Why does bmo set this kind of rate structure ?

My td approved application clealy says prime + 2%. I believe

May 6th, 2015 9:22 pm

Cerium398: Sr. Member; Apr 28, 2014; 675 posts; 184 upvotes; Oakville, ON

May 6th, 2015 9:22 pm

booblehead wrote: ↑Why does bmo set this kind of rate structure ?

My td approved application clealy says prime + 2%. I believe

Who knows? CIBC is currently doing a pre-approval campaign for unsecured Lines of Credit right now...I got the offer, but they are pricing it at Prime + 4.00.

Most people would probably get a better rate by just doing a formal application and talking the hard hit on the credit bureau (as pre-approval pricing cannot be negotiated).

Right now, interest rates are low and Banks are looking for people who are stupid enough to take Lines of Credit at higher interest rates in order to pad their profit margins.

I wouldn't accept anything more than Prime + 2.00; but my credit is excellent. Some people could never get that on an unsecured.

OP should try with either CIBC or TD and see where they price him before accepting BMO's offer I think.

People need to understand that there is no obligation to have your assets and your credit at the same Bank....Big Banks don't really care about you. All you are is a number to them...just go with whomever gives you the best pricing.

May 6th, 2015 9:47 pm

RaiderX [OP]: Sr. Member; Dec 24, 2011; 633 posts; 1406 upvotes; East, Canada

May 6th, 2015 9:47 pm

Cerium398 wrote: ↑Former BMO employee here with Direct Banking...although I did not do anything regarding lending

If you read the Paperwork, this is how the Line of Credit is Priced: Base Rate + or - Variance

Base Rate = BMO Prime Rate (currently 2.85) + Percentage Rate (currently 3.00 - BMO can change this at any time)

Base Rate = 5.85

All Line of Credit pricing is + or - this number

So, a Line of Credit that is 4.10% is not expressed as Prime + 1.25 (2.85 + 1.25 = 4.10)

It is expressed as Base - 1.75 (5.85 - 1.75 = 4.10)

So, therefore:

Base Rate is NOT the same as Prime Rate...Base Rate at BMO is BMO Prime + 3.00

So, you are being Priced at Base Rate + 3.00 which is 8.85

Hard to say whether or not it is a good rate...depends on your personal credit score plus financials

Apply with someone else and see what rate they give you....oh, and whichever Bank you go with, they will do a hard upsell on Insurance for the PLOC; I recommend you decline it

Just so you know, bro...the BMO Line of Credit is essentially a MasterCard. But BMO will not actually issue a MasterCard access card on it for customers anymore unless you go to the branch and demand it. Without MasterCard access on your PLOC, you would have to access it by going into the branch, doing a transfer on Online Banking to chequing or through a chequebook...and BMO charges for the cheques.

CIBC and TD do their Line of Credits differently; there is a loophole people use to turn a Line of Credit at that those Banks into a free chequing account. And the cheques are complimentary.

Thanks for your insight and the thorough explanation.

If BMO come back to me at a couple of percentage points lower, then I'll take that. I do feel like BMO misled me at first and acted like they were giving me some great deal, of prime/base + 3 when really that was not the truth.

You're right about the insurance upsell - they said this rate offered was for $15,000 without insurance.... No doubt they would offer something better if I said yes to insurance.

I think I will be shopping around now. If anyone has any suggestions on a place to get a better rate on a LOC, please let me know.

May 6th, 2015 10:02 pm

604nation: Deal Addict; Aug 31, 2014; 1505 posts; 560 upvotes; YVR, BC

May 6th, 2015 10:02 pm

what credit limit was the LOC for?

try RBC and Scotiabank

May 6th, 2015 10:03 pm

Cerium398: Sr. Member; Apr 28, 2014; 675 posts; 184 upvotes; Oakville, ON

May 6th, 2015 10:03 pm

RaiderX wrote: ↑ I do feel like BMO misled me at first and acted like they were giving me some great deal, of prime/base + 3 when really that was not the truth.

I think I will be shopping around now. If anyone has any suggestions on a place to get a better rate on a LOC, please let me know.

A good majority of the Front-Line CSR's and FSM's (salespeople) are idiots....this applies to any Bank. These people are basically hired out of high school or off the street and paid low-wages in relation to the high sales targets they have to meet.

If it's one thing they love to upsell it is the Creditor Insurance on lending products...because it is extremely profitable.

CIBC is always desperate to sell people credit....granted, I've heard that the most CIBC will do on an unsecured PLOC may be Prime + 3 or Prime + 4 (but that would still beat the 8.85 in pricing that BMO is offering you right now).

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