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What is the difference between a fixed and variable interest rate?

A fixed interest rate remains the same throughout the loan or investment term, whereas a variable interest rate can change based on market conditions, economic indicators, or the discretion of the lender or borrower. With a fixed interest rate, borrowers can accurately predict their monthly payments and budget accordingly, while a variable interest rate can result in uncertain monthly payments and potentially higher costs over time. However, a variable interest rate may also offer more flexibility and potentially lower initial rates.