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Fixed Rate vs. Variable Rate: What Are The Best Borrowing Terms For You?

Published November 17, 2020

6 minute read

Rebecca Henderson

By Rebecca Henderson

Reviewed by Expert Riley Adams, CPA

If you’ve come across the terms “fixed rate” and “variable rate” before, you might have overlooked them as complicated financial terms. But really, when you break it down, fixed and variable rates are actually fairly simple. They are exactly what they sound like — an interest rate that is either set in one spot or one that varies, depending on some outside factors. Plenty of loans are offered in both formats, so you really do need to know the difference. Luckily, we’re here to help.

Knowing the difference between fixed and variable rates could benefit you greatly in the future. If you’re like most folks, you’ll need to take out loans from time-to-time. They could be for a car, an education, or a house. Or anything else you need to borrow money for. Both types of loan rates have their own pros and cons. Like anything else finance-related, it’s all about how you manage your money.

In this article, we’ll help you gain a better understanding of fixed and variable rates. Then you’ll be able to determine which is which (even when they’re not specified). You’ll also know which type best fits your situation. After you’ve journeyed through these two types of rates with us, you’ll be an expert in these terms. And on your way to a better financial future.

Rebecca Henderson

Freelance Writer

Rebecca Henderson has a Master's in German and a Bachelor's in Creative Writing. She alternates her time between writing and working on a variety of motorized projects. Most recently, she and her boyfriend have been building a custom drift trike. Rebecca believes that language, love, and a life worth living are only the first ingredients to happiness.

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