Learn about the difference between a fixed and variable-rate loan.
Published May 17, 2022
With a fixed-rate loan, the interest rate stays the same over the life of the loan, which can help borrowers budget for repayment. With a variable-rate loan, the interest rate changes periodically to reflect current market conditions.
What’s the difference between a fixed and variable-rate loan? With a fixed-rate loan, the interest rate (and in turn: your monthly payment) stays the same over the life of the loan, which can help borrowers budget for repayment. You might pay a premium for this predictability, but good credit could help you secure a low rate.
With a variable-rate loan, the interest rate changes periodically to reflect current market conditions. Typically, there’ll be a cap and a floor that limit how high the interest rate you’ll pay can rise or fall. But if market rates rise, your rate, and therefore loan payment, will increase. If rates fall, you’ll pay less.
Some borrowers prefer the stability of a fixed rate, while others don’t mind risking a rate hike given the potential to save money should rates stay low, or drop.
For more information on this topic, go to LaurelRoad.com.
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This information provided is for informational purposes only and does not substitute consultation with a legal, tax or investment professional for important financial decisions. Laurel Road assumes no liability for loss or damage incurred by use of the information provided. Please visit laurelroad.com for full product details, terms and conditions.
All Laurel Road lending products are subject to credit approval.