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What is the difference between a fixed rate and a variable rate?

April 26, 2017Business Finance fixed Investing rate

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What is the difference between a fixed rate and a variable rate?

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Fixed Rate Mortgage has the same rate for the entire term of the loan. Variable Rate Mortgage has a rate that can change, causing your monthly payment to increase or decrease depending on fluctuating interest rates.

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Yes most loans are fixed rate and for a loan that small it would be the best way. A variable rate can be like a credit card where they change it at will or like an ARM mortgage where it is tied to an index with a margin.

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With a fixed rate loan/line, the interest rate will not change during the term of the loan. With a variable rate, the interest rate will move up or down, according to a pre-selected index, over the term of the loan. Home Equity loans offer a fixed interest rate, and Home Equity Lines of Credit feature a variable rate. Interest rates are based on the amount you borrow and the loan term.