A fixed rate provides a defined interest rate for the period specified in the agreement. A variable rate may change under an agreed method or reference rate.

Predictability can help with budgeting, but the full comparison includes fees, term and repayment conditions. Neither label alone determines the better arrangement.

For variable-rate borrowing, consider the effect of higher payments on cash flow. Read how and when the rate can change before committing.

Key takeaways

  • A fixed rate provides a defined interest rate for the period specified in the agreement.
  • Predictability can help with budgeting, but the full comparison includes fees, term and repayment conditions.
  • For variable-rate borrowing, consider the effect of higher payments on cash flow.