Loan document explains LIBOR rate rules

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Dear Dr. Don,
The LIBOR rate on my adjustable-rate loan was to change on Nov. 1, 2008. The bank changed the rate as of Sept. 17, 2008. What was the LIBOR rate per the Wall Street Journal on these two dates? I want to make sure that I am not paying a higher rate because someone chose to change the rate on a day that the rate was high.
— Margaret Muddle

Dear Margaret,
You need to go back to the loan documents to review the reset provisions for the loan. In general, interest is paid in arrears, so your November payment is for October’s interest and October’s interest would be based on a rate known in September.

If your loan is a monthly reset, it’s likely you’ll get the November rate in January, and that November rate will be based on the LIBOR rate observed in mid-November. I can guarantee the lender doesn’t get to pick and choose dates and rates that are to its advantage in calculating the reset rate on your loan.

The Wall Street Journal publishes four different LIBOR rates each business day: one-month, three-month, six-month and one year. There are others. You can access these rates online without a subscription, but won’t have access to historical numbers.

The reference desk at your local library should be able to help you find the historical data you want to review once you know which rate your loan is based upon. Bankrate provides these same four rates on a weekly basis on its “LIBOR, other interest rate indexes” page.