Phantasm
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Two widely known types of interest rates available on personal loans are fixed and variable interest rates. Here’s what you need to know about fixed and variable interest rates:
1. Fixed Interest Rate.
- Within the entire term, an individual receives a constant interest rate.
- This implies that your monthly payments and total paid towards interests remain unchanged.
- They offer a sense of stability and certainty since you would be aware of how much you are required to pay each month.
- These type of loans are good if you like stable budgets and don’t like surprises due to changes in the current market prices.
- One thing that should however be taken into consideration is that fixed interests could be more expensive than the variables at the beginning.
2. Variable Interest Rate
.During a specific period of time, it is possible for a variable interest rate to change its value.
- For example, floating rates are benchmarked against prevailing market indices such as prime rate or LIBOR( London Interbank Offered Rate).
- Your rate of interest can therefore go up or down together with your monthly installments whenever this reference point fluctuates..
- As such, payments could increase or reduce over terms when mortgage is payable..
- The advantage to borrowers here lies in the fact that floating rates usually fall below the common fixed rates initially..
- However, even though budgeting becomes tougher due to likely rises in cost, they still remain attractive because no one knows what future holds for us all.
1. Fixed Interest Rate.
- Within the entire term, an individual receives a constant interest rate.
- This implies that your monthly payments and total paid towards interests remain unchanged.
- They offer a sense of stability and certainty since you would be aware of how much you are required to pay each month.
- These type of loans are good if you like stable budgets and don’t like surprises due to changes in the current market prices.
- One thing that should however be taken into consideration is that fixed interests could be more expensive than the variables at the beginning.
2. Variable Interest Rate
.During a specific period of time, it is possible for a variable interest rate to change its value.
- For example, floating rates are benchmarked against prevailing market indices such as prime rate or LIBOR( London Interbank Offered Rate).
- Your rate of interest can therefore go up or down together with your monthly installments whenever this reference point fluctuates..
- As such, payments could increase or reduce over terms when mortgage is payable..
- The advantage to borrowers here lies in the fact that floating rates usually fall below the common fixed rates initially..
- However, even though budgeting becomes tougher due to likely rises in cost, they still remain attractive because no one knows what future holds for us all.
