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Personal loan
Difference between fixed and variable interest rates on loans
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[QUOTE="Phantasm, post: 336907, member: 94599"] 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. [/QUOTE]
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Difference between fixed and variable interest rates on loans
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