Fixed vs Variable Rate Loans

A fixed rate is where a set interest rate is applied to the loan for an agreed term (usually 1, 3 or 5 years). Regardless of any interest rate changes, the principal and interest repayments will remain the same for the agreed term. This is very appealing for individuals that like to budget as the repayment amount remains consistent.

A variable rate, also referred to as a floating rate, means that the interest rate fluctuates with changes to market interest rates. As a result, your repayments will fluctuate as the rate changes. This loan option is preferred by individuals that are interested in making additional loan repayments.

Splitting your loan, allows you to have a portion fixed and a portion variable. The advantage of this is managing the risk as well as having the ability to make extra repayments. You can generally choose what portions you would like to split ie. 50/50 or 30/70, you can choose.

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