Fixed rate loans mean that that interest rate on the loan is fixed and will not change over time. Prime Rate is based on many economic factors including the Federal Reserve's decision to raise or lower prevailing federal funds interest rates for banks' short-term borrowings. Banks use the Prime Rate in pricing commercial loans to their best and most creditworthy customers. Treasuries are debt securities of the U.S. government issued through the U.S. Department of Treasury. Payment of principal and interest is guaranteed by the U.S. government, making Treasuries among the highest quality investments available.
Treasuries are the benchmark against which other debt securities are measured.
The interest rates on GE Capital fixed rate loans are generally based on five or ten-year Treasury rates plus a spread, while variable rate loans are based on commercial paper plus a spread. The spread for both fixed and variable rate loans vary according to each client's creditworthiness and various other circumstances. Interest rates will depend on a variety of factors such as current short term market rates, timing of the loan and credit risk. The cost structure of a commercial lender such as GE Capital is not unlike that of a manufacturing concern. Where a manufacturer incurs cost of goods sold, GE Capital incurs interest expense from raising funds in capital markets.