A Fixed Rate refers to the interest payable against the loan you take out in order to repay the lender. In principle, a fixed-rate loan means the interest payable on top of the amount you borrow remains constant throughout the time of your repayment.
With other types of loans such as variable rates, the level of interest payable may fluctuate with other economic factors. This could mean some of your monthly payments are higher with added interest. With a fixed-rate secured loan, you know the exact amount you will pay each month until the end of the term unless you choose to pay more.
Benefits of Fixed Rate Loans
- Budgeting to repay your loan each month is much easier. You will pay the same amount each month until the end of the term so you will know exactly what you owe the lender.
- Less risk is afforded by a fixed-rate loan. For many people running a tight budget the safety of knowing they will not see a sudden interest rate increases adds peace of mind. This can help with monthly budgeting and know what you can afford in the future.
- Fixed-rate secured loans are normally available over 2-5 years giving you the flexibility to be able to afford the repayments.