The index is the economic indicator for the loan and may increase or decrease reflecting market conditions. While most home equity credit lines use the prime rate as the index, three month treasury bills or other indexes may be used by a lender. The prime rate is the rate major lending institutions offer their most creditworthy clients. The prime rate is listed in a variety of publications, e.g., The Wall Street Journal, The New York Times, and the Federal Reserve Statistical Release. The percentage added to the index to arrive at the adjusted rate.
Some lenders offer a discounted margin for their customers.
The frequency with which the interest rate is adjusted, based on changes in the index. With home equity credit lines, borrowers may generally choose a loan term as short as five years or as long as 40 years. Some lenders allow borrowers to access funds for five years while others allow borrowers to draw funds throughout the duration of the loan. There are a variety of payment plans available to borrowers. Generally, lenders offer borrowers the option of paying interest only for a set period of time, followed by payments of interest plus principal for the remainder of the loan term.