Benefits Of Fixed Vs Variable Rates On Personal Loans

What is the difference between fixed and variable rates on a personal loan?

Benefits of Fixed vs Variable Rates on Personal Loans

Fixed rate loans

With a fixed interest rate, your rate and monthly payments will stay the same for the entire term of your loan. This can provide you with peace of mind, as you'll know exactly how much you'll be paying each month. Fixed rate loans are also a good option if you're worried about interest rates rising in the future.

Variable rate loans

With a variable interest rate, your rate and monthly payments can change over time. This is because variable rate loans are tied to the prime rate, which is set by the Bank of Canada. If the prime rate goes up, your interest rate and monthly payments will also go up. Conversely, if the prime rate goes down, your interest rate and monthly payments will also go down. Variable rate loans can be a good option if you're comfortable with the risk of your interest rate changing.

Conclusion

The decision of whether to choose a fixed or variable rate loan depends on your individual circumstances. If you're looking for peace of mind and stability, a fixed rate loan may be a good option for you. If you're comfortable with the risk of your interest rate changing, a variable rate loan may be a good way to save money.