Debt terms you should know:
Fixed vs Variable Rate loans
Knowing the interest rate you pay on a loan sounds reasonable and sensible but how do they set the rates you pay? Some loans have interest rates which move regularly with the interest rates set by the government. These are called Variable rate loans. Those which do not move, are said to be Fixed.
Fixed rate loans sound safe - you are always paying the same amount... But some fixed rate loans carry a “Lock in”. This is a vital stat of your loan. Once the lock-in time expires, your Interest rate can move to whatever the current market rate is which can then in turn change your monthly payments.
Penalty for Early Repayment:
Want to pay down some of that loan early then? Great idea! But you will need to check if your loan carries penalties if you repay them before the expiration date. This may make it uneconomical to repay your loan off early but be able to pay smaller amounts annually instead.
Our tip at the end of the day... Have everything in writing. Get hold of your loan agreement so you know exactly which terms apply to you.