Fixed-rate personal loans let you lock in a rate at the beginning of your loan term, keeping your repayments the same throughout the duration of your loan. This type of loan comes with a lot of benefits, but also a few added restrictions. We break down how fixed-rate personal loans work in this guide to help you decide if it’s right for your needs.
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Fixed rate personal loans have an interest rate that won’t increase or decrease for the duration of the loan term.
Fixed-rate personal loans usually last from one to five years, with some extending up to seven or 10 years.
Fixed-rate personal loans come secured or unsecured.
Having your repayments remain fixed for the life of a loan is a big benefit, but it’s important to understand fixed-rate personal loans come with restrictions – these mostly have to do with repayments. For example, you may not be able to make additional repayments or pay off your loan early without incurring fees.
Compare fixed-rate personal loans
What features should I consider?
Interest rate. Rates will vary depending on what type of loan it is (secured or unsecured), as well as your own personal financial circumstances including your credit score.
Loan term. Lenders offer varying loan terms depending on the type of loan it is (secured or unsecured). You can usually expect a term between one and five years, with some lenders extending up to seven or even 10 years.
Repayment stability. No matter what happens to rates in the market, the interest rate is fixed and that means your repayments stay the same for the entirety of your loan term.
Early repayment penalties. Fixed-rate personal loans can come with fees for paying your loan back early or for making additional repayments. You might find some lenders only charge fees if you repay your loan within a certain time period, for example, in the first year.
Upfront and ongoing fees. Look out for origination fees or annual fees, which can usually be avoided with fixed-rate personal loans.
What can you use a fixed-rate personal loan for?
Personal loans with a fixed interest rate can be suitable to help you finance a wide range of different purposes, including:
Four important questions to ask before applying for a fixed-rate personal loan
With so many fixed-rate personal loans to choose from, it’s important to compare your options to get the best possible loan for your needs. Ask yourself the following questions:
Is the loan secured or unsecured? When looking to buy a vehicle or property, you can consider a secured fixed-rate loan and use the asset you’re looking to buy as security for the loan. Secured loans come with lower interest rates because they’re less risky for lenders – but you’ll lose your asset if you fail to repay the loan.
What’s the interest rate? This is the rate you will be paying for the whole term of your loan. Compare the APRs of different loans, which takes into account both the interest rate and any fees. The APR ultimately tells you the true cost of the loan.
How long is the loan term? You can expect most lenders to offer repayment terms of between one and five years, but some lenders offer up to ten years. You can lower your repayments with a longer loan term, but you will pay more interest.
What fees and penalties will I be charged? Look out for penalties for late payments, upfront charges such as origination fees, any ongoing monthly or annual fees, and what you will be charged if you repay the loan early or make extra repayments.
Benefits and drawbacks of fixed-rate personal loans
No change in what you pay. Your monthly repayments will stay the same for the entire loan term, allowing you to easily budget each month.
Your rate won’t be affected if the market conditions take a turn. If market interest rates go south, you won’t have to worry about your interest rate increasing.
You still have flexibility with your repayments. Most lenders offer loans with monthly repayments, however you may be able to find an offer with bi-weekly or weekly repayments.
You can’t benefit from favourable market conditions. If market interest rates improve, the rate applied to your loan won’t decrease.
There may be restrictions on your repayments. You may not be able to make additional repayments or repay your loan early without incurring a penalty.
What to watch out for
Taking on a longer loan term than you need. While your repayments might be lower each month with a longer loan term, you’ll end up paying more interest.
Taking on a loan you can’t afford. Do the math to make sure you’ll be able to repay the loan before you apply. This is a must if you take out an unsecured loan, as you stand to lose your collateral. Also, defaulting on a loan can leave a black mark on your credit report for up to seven years.
Not reading the fine print. Go over your loan contract so you’re aware of all fees, charges and conditions.
Here’s how you can apply in 3 easy steps
Compare + Click. Use the table above to compare your fixed-rate personal loan options. Once you find a loan that’s right for you, click apply to start the application process.
Eligibility + Application. You will need to meet minimum age, income, employment and credit requirements before submitting your application. Online applications differ, but generally you’ll need your personal, financial and employment details.
Approval + Funding. You can usually find out if you’re approved – or at least conditionally approved – within a few minutes, but some lenders may take longer. You can always check back with the lender to find out about the status of your application. If you’re approved, your loan can typically be funded any time from that same day to a week or two later.
A fixed-rate is a rate that is locked into your loan contract at the beginning of your loan term. With a variable rate loan, you still have a rate applied to your loan contract, but this may fluctuate throughout the loan term (depending on the prime rate). Variable loans usually start out with lower interest rates, but may increase over the course of the loan term. The prime rate is usually taken from the Bank of Canada’s overnight lending rate, which can change based on economic conditions.
This depends on your lender, but you will generally have to submit an application to request a larger loan amount.
You may be able to make extra repayments without facing any extra fees or you may have to pay a small fee, depending on your lender. Check your loan contract before you apply in order to avoid paying unnecessary fees.
This differs between lenders, but you’ll usually be able to apply for a loan term of between one and five years, with some lenders offering terms up to seven or 10 years.
Kyle Morgan is a writer and editor for Finder who has worked for the USA Today network and Relix magazine, among other publications. He can be found writing about everything from the latest car loan stats to tips on saving money when traveling overseas. He lives in Asbury Park, where he loves exploring new places and sipping on hoppy beer. Oh, and he doesn't discriminate against buffalo wings — grilled or fried are just fine.
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