Legal Definitions - stated rate

The stated rate refers to the advertised or contractually specified interest rate on a loan, investment, or other financial product. It is the face-value rate that is explicitly written or *stated* in the agreement or promotional material, before any adjustments for the frequency of compounding or additional fees are taken into account. This rate is also commonly known as the nominal rate.

• Example 1: Car Loan Advertisement

  A car dealership promotes a special financing offer for new vehicles with an interest rate of 3.9% per year. This 3.9% is the stated rate. While the actual cost of borrowing might be slightly higher due to how often the interest is calculated (e.g., monthly), the 3.9% is the headline rate presented to potential buyers.

• Example 2: Certificate of Deposit (CD)

  A bank offers a 12-month Certificate of Deposit (CD) with an annual interest rate of 1.5%. This 1.5% is the stated rate. Even if the interest is compounded quarterly, leading to a slightly higher effective annual yield, the 1.5% is the rate explicitly promised for the year-long term.

• Example 3: Mortgage Agreement

  When a couple signs their mortgage documents, the loan agreement specifies an interest rate of 5.8% for their 30-year fixed-rate mortgage. This 5.8% is the stated rate of their loan. It is the foundational rate upon which their monthly interest payments are calculated, as explicitly laid out in their contract.