Reserve as a Mark-up from Buy Rate to Sell Rate

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Reserve as a Mark-up from Buy Rate to Sell Rate

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*Setting Lien Holder Defaults :

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A. The Interest Rate charged by the Lien Holder.

B. The percentage of the Mark-Up that determines the actual reserve amount.

( C. In some circumstances the bank will require the Ratio Method for Mark-up. NEVER use this unless told to do so by a bank. See As a Mark-Up Using the Ratio Method for details.)

 

*Below is what the actual sales screen looks like when using the Flat Amount method:

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EXAMPLE: This is how Frazer calculates the reserve as a mark-up.

Finance Charge

$2479.76 (15% APR on a total amount to finance of $10,000.00)

 

Bank Buy Rate

 

The Bank’s Buy Rate in this example is 8%.

At an APR of 8% there would be a finance charge of $1280.96

 

Sell Rate

 

15% (The actual finance charge of $2497.76)
(Comes from the APR entered on the pricing tab of the sales screen.)

 

 

Reserve Rate

 

50% (The percent the bank will hold in reserve)

 

 

Method

 

SellRateFinance – BuyRateFinance = TotalSpread * PercentHeld

 

 

CALCULATION

 

((15% APR of $10,000) – (8% APR of $10,000)) * 50%

 

 

($2479.76 - $1280.96) * .5

 

 

$1198.80(Total Spread) * .5

 

 

Reserve Amount is

 

$599.40

 

 

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