Fixed loans Vs Variable loans: Knowing what to choose the right one for you
There is no way you can see into the future and predict whether you will be better or worse off with fixed loans or variable loans, because no-one knows what will happen with the economy and interest rates.
However you can make an educated guess based upon your situation and future plans as to whether a variable or fixed loans interest rate is right for you.
A Variable loans interest rate is:
An interest rate charged on your loan that varies as the market fluctuates.
A Fixed loans interest rate is:
A loan where the rate of interest or fee’s you are charged for the term of the loan remains at a fixed rate.
This allows the borrower to predict future repayments no matter what interest rates do.
Generally if interest rates are low but could increase it would probably be better to lock the loan in with a fixed interest rate.
If interest rates are lowering then it would be better to have a variable interest rate, because as the variable interest rates fall, so too will your loan interest rate.
Fixed loans rates protect borrowers from sudden increases in mortgage repayments, they are easy to understand and they are basically the same with most lenders.
The other side of fixed loans rates is when interest rates are high, qualifying for a loan is harder because the repayments are larger.
Fixed loans rates are usually between 15-30 year terms, with smaller monthly interest rates. However this leaves the consumer paying a much greater amount of interest because it takes them longer to pay off the principle amount of their loan within the 30 year term.
Shorter term mortgages cost a lot less overall.
Variable loans rates are much more complex than fixed loans rates because there are many factors that can cause your rate to fluctuate most of them out of your control.
Some find them appealing because they offer lower initial payments. However your monthly interest rate can change significantly and are often structured to double within a few years.
You need to decide which is the right interest rate for your situation.
Some questions you should be asking yourself are:
- Do you have a large mortgage payment?
- Can you afford to repay the mortgage as well as interest?
- What if interest rates rise? Will you still be able to afford your mortgage?
- Is this your forever home or will you likely move within the foreseeable future?
- Are interest rates on the way up or down?
Read about your credit score here.
What are the Pro’s and the Con’s of Fixed loans and Variable loans rates?
Variable loans rates
- Makes budgeting harder
- Mortgage stress if the rates rise and you are unprepared.
- Mortgage fluctuates each month
- You can make extra repayments whenever you like
- It offers more features like, unlimited redraws, savings on interest with offset accounts.
- Easier to switch loans if your situation changes.
Fixed loans rates
- Rate drops won’t apply to you
- Limits on extra repayments – additional payments are often not allowed or capped at a low amount or you could be charged a fee.
- A redraw facility may not be offered on a fixed rate home loan.
- You may be charged break fee’s on fixed loans rates if you change or payoff your home loan within the fixed rate period.
- Fixed loans rates make budgeting very easy and allows consumers to plan ahead.
- Rate rises won’t affect you.
How do I decide on the best home loan rates for my family?
If you are still feeling unsure what whether fixed loans or variable loans are right for your needs then maybe it is time to consult a mortgage broker. They can give you plenty advise on who has the best interest rates for fixed loans and variable loans and they can do all the shopping around for you!
However ensure you get a written quote or contract that outlines their fee’s as many mortgage brokers fee’s will often be wrapped up in your new home loan, which isn’t a problem but being aware that they are being paid by the lender for referring your business.
Looking for a personal loan?
Great! Nifty Loans offer fast personal loans starting at $300 and going up to $5,000. The repayment period depends on the amount you decide to borrow. At Nifty, we know when you’re looking for cash, it’s usually quickly. So, that’s why it only takes a few minutes to complete our application, and you could receive an outcome in 60 minutes (if you apply during business hours). We think that’s pretty speedy! Read on to learn more about the personal loans we offer.
What personal loans do we offer?
At Nifty Loans, we require a reason for your loan when you apply. To help you along with your application, here are a few reasons why you could apply for a quick personal loan:
- Travel expenses
- Car repairs
- Medical costs
- Legal costs
- School fees
- Unexpected bills
And the list could go on! As part of our responsible lending policy, we cannot approve an application for expenses that are deemed essential, such as a food or rent etc. If you have any questions about what you can or cannot apply for, contact our team at email@example.com or give them a call on 1300 471 328.
Who is eligible for a personal loan?
Before you apply for quick loans, there are a few requirements to meet.
To apply, you must:
- Be over 18 years old
- Be an Australian citizen
- Have a regular income for at least 3 months in a personal bank account
- Have an active mobile and email address
That’s it! Just four little requirements to meet before you can apply for quick loans! Super easy, right?! Well, if you’re ready to apply, just scroll up and get started with our loan calculator.
Ready to apply?
Understand the difference betweeen fixed loans and variable loans, and you now know a little more about personal loans – you’re ready to apply. Just scroll and begin with our loan calculator, then once you’ve decided to how much to borrow and for how long, you’ll be taken to our application.