Fixed vs Variable Interest Rate: What's the Difference?
A fixed rate stays the same for the whole loan. A variable rate moves with a benchmark rate, so your payment can rise or fall.
| Fixed rate | Variable rate | |
|---|---|---|
| Payment | Same every month | Changes when the benchmark moves |
| Starting rate | Usually higher | Usually lower |
| Risk | You carry none of the rate risk | You carry the risk of rising rates |
| Best when | Rates are low or you need a predictable budget | Rates are expected to fall or you'll repay quickly |
Bottom line
Choose fixed for certainty, variable only if you can afford the payment at a much higher rate.
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