Fixed rate loans allow borrowers to lock in the interest rate for a term.
This means that even if interest rates rise, the loan repayments won’t.
Fixed rate loans therefore give borrowers the peace of mind of knowing that their repayments won’t increase during the term of the loan or fixed rate period.
However, if interest rates decrease during the fixed term, the repayments will not drop accordingly.
Fixed rate loans generally do not offer the flexibility of a variable rate loan as extra repayments are limited by most lenders and early payout can incur a penalty. However fixed rate loans are especially useful for borrowers on a tight budget or those with large borrowings or for people who just want the peace of mind of knowing that their repayments will not increase during the term of the loan.
