Learn the difference between these two types of interest rates. Fixed interest rate loans always have the same interest rate until they are paid off, while variable interest rate loans have interest rates that go or down depending on the market. For more information, read our blog post, What’s the Difference Between Fixed and Variable Interest Rates?
Hey everyone, so I know we’ve been getting a lot of questions about what the difference is between a fixed interest rate and a variable interest rate. So here’s the difference. A fixed interest rate loan will always have the same interest rate until it’s paid off. So if you have, let’s say, a fixed interest rate loan at 6.8 percent, Well, then the loan is going to stay at 6.8 percent until the loan is paid off, which means you always know how much your monthly payment is going to be.
A variable interest rate loan won’t necessarily stay the same. It may go up or down. The rate may go up or down depending on the market. The variable interest rate itself is usually tied to an index like the Prime rate or the LIBOR.
And this should be spelled out in the variable rate loan paperwork. Also how often the rate itself on a variable rate loan can change depends on the loan itself. So, we’ve seen some variable interest rate loans change once a year, some change once every three months, some change once every month. So, this is also something that’s going to be in your loan paperwork.
So, make sure you know that information and check your loan paperwork if you are going to be borrowing a variable interest rate loan. For more information or if you have any other questions, here’s where you can contact us.
