Loans will be listed with a variable or a fixed interest rate. If you are considering taking out a loan, you need to be aware what the difference is between variable and fixed interest financing. This video explains the differences between the two and whether or not one is better than the other.
Interest rates are the percentage of the loan that needs to be paid back with the money borrowed. If the interest rate is fixed, it won’t change for the life of the loan. It’s simple and predictable. Variable interest rates can change over the time you repay the loan. Usually, it’s tied to an international standard rate, like LIBOR.
There are a lot of specifics about the international interest rates that you can or cannot research on your own. It’s not practically important to your loan. What you need to understand is that fixed and variable interest rates are not controlled by either you or your lender. It is a completely independent measurement.
Fixed rates are usually a good idea if the interest rate is particularly low or in the middle. If you anticipate interest rates going up, you can mitigate the cost to you with a fixed interest rate. For more information, check out the video above.
