Patent ID: 8478670

Claim:
A computer-based method for selecting a debt instrument for a borrower from a plurality of consumer debt instruments, said plurality of debt instruments having respective scheduled lives, costs, risk levels, annual percentage rates (APR) and option-adjusted spreads (OAS), said method comprising: selecting, by the computer, debt instruments from the plurality of debt instruments, said selected debt instruments having risk levels that correspond to a risk-tolerance of the borrower, wherein said risk-tolerance of the borrower is a range of durations received from the borrower that are within the scheduled lives of the debt instruments; determining, by the computer, present values of cash flows of the selected debt instruments based on the respective option-adjusted spreads, wherein the present values include the values of the borrower's option to prepay the selected debt instruments before the respective ends of the scheduled lives of said debt instruments; determining, by the computer, option-adjusted annual percentage rates (option-adjusted APR) for the selected debt instruments based on the respective present values of the cash flows, including the values of the borrower's option to prepay the selected debt instruments, which values are determined by the OAS's of the selected debt instruments; selecting, from the selected debt instruments, a debt instrument having the lowest option-adjusted APR for a duration within the range of durations received from the borrower; and outputting, from the computer, a report identifying the debt instrument selected for the borrower, wherein the risk-tolerance of the borrower corresponds to a predetermined period of time in which the borrower will repay the debt instruments.