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As well as choosing a lender, deciding on your loan term and choosing between secured and unsecured, you also have to decide whether you want your rate to be fixed or variable. These two rate options offer different benefits and drawbacks. The guide below will take you through the differences between fixed and variable interest rates and help you decide which option is right for you.
The key differences between fixed and variable interest rates on personal loans
Description
Your rate remains the same throughout the specified term.
Your rate may fluctuate throughout the loan term.
Main benefit
Your repayments remain the same no matter what’s happening in the market.
Your starting rate is usually lower than that of fixed rate loans and could possibly remain lower.
What are fixed and variable interest rates on personal loans?
Personal loans come with two types of interest rates: fixed or variable. Fixed interest rates remain the same throughout the specified term, which may be for the entire loan term or for an introductory period. If you opt for a variable rate personal loan, you’ll receive the advertised rate, but this rate may change throughout the loan term depending on interest rate movements in the market.
Compare a range of fixed and variable rate personal loans
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
The right type of interest rate for you will depend on a few different factors. Here are a couple of questions you can ask yourself to help you decide:
What interest rate can I get? When you find the most competitive rate, be sure to check the eligibility criteria of that loan to see if you qualify.
How affordable are the monthly payments? If your repayments are only just working with your budget, a fixed rate loan will ensure they won’t increase.
Aliyyah Camp is a SEO content strategist and former publisher at Finder, specializing in consumer and business lending. Her writing and analysis has been featured in CentSai, the Dough Roller and the Chicago Tribune. She holds a BA in communication from the University of Pennsylvania.
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