Respuesta :
Borrowers are protected from unlimited increases in the interest rate, lenders establish " interest rate caps."
The first cap which is known as the periodic cap sets the amount of increase or decrease which is allowed in each adjustment period. The second cap which is known as overall or aggregate cap sets a maximum interest-rate increase over the lifespan of the loan.
An interest rate cap is a limit on the amount how much high an interest rate can rise on variable-rate debt. Interest rate caps can be fixed across all types of variable rate products. But these are commonly used in variable-rate mortgages only or in the specifically adjustable-rate mortgage loans only.
Interest rate caps can also have an overall limit on the interest for the loan and also be used to limit incremental increases in the rate of a loan.
Interest rate caps provide borrowers a good protection against the dramatic rate increases and it also provide a ceiling for maximum interest rate costs.
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