You are looking at a loan of $14,500 for one year to renovate your apartment. The interest rate on the loan is quoted as 9.9 percent plus three points. The interest rate quotation in this example requires the borrower to pay three points to the lender up front and repay the loan later with 9.9 percent interest. (Remember, A point on a loan is 1 percent (one percentage point) of the loan amount.)

What rate are you actually paying on the loan?