What is a Variable Interest Rate?

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Many personal loans offer fixed interest rates — meaning your rate stays the same throughout the life of the loan allowing you to budget for set payments as long as the loan remains active. Some loans and all credit cards offer variable interest rates, which change depending on market conditions and your payment history. What is a variable interest rate? Understanding how a variable rate impacts your loan and your monthly payments is key to getting the right credit product

How Often Does a Variable Interest Rate Change?

Because your variable interest rate is tied to the benchmark interest rate — or index — your rate goes up or down when the index rate changes. If you have an adjustable rate mortgage, the index could change annually, while an adjustable loan payment could change monthly depending on which key market indicator your loan is tied to.

How Can I Keep My Variable Interest Rate Low?

If you’ve chosen an adjustable rate loan, the best thing you can do to keep your rates low is to make your payments on time. Late payments can add fees to your loan as well as bumping your interest rate into a “high-risk” bracket. Making more than your minimum monthly payment also helps to reduce interest charges by reducing the principal balance on which interest is calculated.

Variable vs. Fixed Interest: Which is Best?

If you’re considering taking out an auto loan, for example, and know you’ll have it paid off quickly, then a variable rate could save you money, since current variable rates are typically lower than the current fixed rates. If, however, you know you’ll need more time to pay off your purchase, as in the case of a mortgage or other significant item, then a fixed rate loan will prevent your payments from changing and will protect you from sudden fluctuations in the market.

Learn About Your Options at Xpress Cash

If you’re considering a loan to cover emergency expenses or a major purchase, contact us or stop by an Xpress Cash branch in Michigan, Idaho, or Wisconsin. One of our specialists can give you more information on our loan products, as well as pointers on how to calculate your interest and keep your interest rates low.