What is a variable interest rate?
As opposed to a fixed interest rate, the variable interest rate is a financing option that can allow a consumer to take advantage of current economic conditions to pay a lower rate of interest on a loan or mortgage. Because the variable interest rate is based on current averages on a national level, the general state of the economy can drive down interest rates for extended periods of time. During these periods, the consumer can save a substantial amount off the original or starting rate of interest associated with the transaction. Variable interest rates do carry a greater degree of risk than going with a fixed rate. Because the fixed rate of interest will remain constant for the duration of the loan or mortgage, the investor knows how much he or she will pay in interest over the long term. With a variable interest rate, this is not the case. The investor may eventually pay much less interest than indicated at the time the contract went into effect and the completion of the terms. On
