What determines variable interest rates?

Variable rates are typically tied to a benchmark rate like the prime rate or SOFR (Secured Overnight Financing Rate). When these benchmarks change, your rate adjusts accordingly, usually with a margin added.

How often do variable rates change?

This depends on your loan terms. Some adjust monthly, others quarterly or annually. Your loan agreement will specify the adjustment schedule and any rate caps that limit how much rates can change.

Are there caps on variable rate increases?

Many variable rate loans have caps that limit how much your rate can increase per adjustment period and over the life of the loan. Always ask about caps when considering a variable rate loan.

Should I refinance from variable to fixed?

Consider refinancing if rates are rising, you want payment stability, or you're concerned about future increases. Calculate the refinancing costs versus potential savings before deciding.

Fixed vs Variable Rate Loans

Compare fixed vs variable rate loans. Understand how each interest rate type works and which is best for your financial situation.

Check Your Rates

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Fixed Rate Loan

Predictable monthly payments
Protection from rate increases
Easier budgeting
No surprises over loan term
Peace of mind
May start higher than variable rates
No benefit if rates drop
Less flexibility

Best For:

Those who prefer stability, long-term loans, and predictable budgeting

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Variable Rate Loan

Often lower initial rates
Benefit when rates drop
Can be cheaper short-term
Rate caps may limit increases
Payments can increase
Harder to budget
Market risk exposure
Uncertainty over loan term

Best For:

Short-term loans, those expecting rates to fall, or borrowers comfortable with risk

Side-by-Side Comparison

Feature	Fixed Rate Loan	Variable Rate Loan
Payment Predictability	Stays the same	Can change
Initial Rate	May be higher	Often lower
Budget Planning	Easy	Difficult
Rate Drop Benefit	No	Yes
Rate Increase Risk	None	Yes
Best for Long Terms	Yes	Risky
Best for Short Terms	Works	Often better

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