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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 that 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 the same amount... 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? Great idea! But you will need to check if your loan carries a penalty if you pay them before the expiration date. This may make it uneconomical to repay your loan off early but you are able to pay smaller amounts annually instead.

Our tip?

Have everything in writing. Get ahold of your loan agreement and go through it carefully so you know exactly which terms apply to you.


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