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Variable rate personal loans tend to come with lower starting APRs than their fixed-rate counterparts. But as its name suggests, the rate can vary — or change — throughout the term of the loan depending on market conditions. Read on to learn more about how variable rate loans work, what the benefits are and what you’ll want to watch out for.
With a variable rate loan, the interest rate that you’ll pay will be based on a specified percentage + or – the prime rate. The prime rate is usually based on the Bank of Canada’s overnight lending rate and can fluctuate up or down based on economic conditions.
A variable rate can change over the course of your loan term, and usually starts out cheaper than a fixed interest rate, but can increase and be more costly a few years into your loan term. With a variable rate, your monthly payments will vary if the prime rate fluctuates.
Term lengths usually sit between one and five years, with some lenders offering terms up to seven or 10 years.
Borrowing amounts typically range anywhere from $500 to $35,000 (or sometimes as high as $50,000 or $100,000). Depending on the lender, you may be able to make early repayments without facing additional fees and charges.
A variable rate personal loan can be either secured or unsecured. Taking out a secured loan means you’ll need to provide collateral in order to “secure” the loan.
Finder does not currently have any variable rate loan options available. You may like to consider these fixed-rate personal loans instead.
There are a few factors you should take into consideration when comparing personal loans:
The Annual Percentage Rate (APR) incorporates the fees as well as the interest rate to show you the true cost of a loan.
While a variable rate loan can save you money over the life of your loan, unexpected increases in the prime rate can send your interest rate far higher than a fixed-rate and ultimately cost you more. Before applying for a variable rate loan, compare your personal loan options to find the right one for your needs.
Need access to cash? Cash Money lines of credit offer flexibility to borrow as much or as little as you need, up to a maximum of $10,000.
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