A fixed interest rate means exactly that: the interest rate doesn't change. This effectively means your repayments won't change either. But your monthly repayments can be affected by other factors, such as loan fees.
Personal loans all work in the same way: you borrow money and pay it back with interest charges and fees. But with fixed rate personal loans your interest rate stays the same. This means your repayments are fairly fixed and predictable.
You can fix your rate for the entire loan term with most lenders, or for part of the loan term.
Here's a simple example:
If your loan had a variable rate, then it could change at any time, potentially increasing or decreasing your repayments.
You can get a fixed interest rate for most types of personal loan:
👍 Your interest rate stays the same each month, meaning your repayments won't change.
👍 You're unaffected by interest rate rises.
👍 If interest rates fall you won't be able to take advantage of it.
❌ Some lenders limit your ability to make extra repayments, keeping you in debt for longer.
👍 Your interest rate can change at any time (although lenders don't really move variable rate personal loans around that much).
👍 If rates rise your repayments rise too.
👍 If rates fall you can lower repayments.
❌ These loans let you make extra repayments more easily and are more likely to offer redraw facilities
An analysis of the rates in Finder's database shows that fixed rates are often slightly lower than variable rates on average.
But these are average figures from a large database and are not representative of any particular product. That's why comparing rates yourself is always a good idea.
The differences between fixed and variable rate personal loans are smaller than you might think. Some lenders offer the same rate for both fixed and variable loans.
For many borrowers finding a loan with fewer fees and a lower interest rate matters more than if it's fixed or variable.
A fixed rate personal loan might work better for you if:
If you fix your personal loan rate and then later decide you want to refinance to a better loan, or pay off the loan early, it might cost you.
Some lenders charge an early repayment fee for breaking a fixed rate loan early. This could be a flat fee of (for example) $300. Or it could be calculated based on your loan details and the amount your lender stands to lose when you repay the loan early.
Lenders may call this a break fee or an early repayment adjustment. Check your loan contract for the details of this cost before you fix your rate.
Black Friday is now over, but you can still pick up stacks of Cyber Monday deals that are every bit as good.
Sharesies boasts 500,000 Kiwi customers - or one-tenth of the New Zealand population.
Is it worth spending more with Everyday Extra or Coles Plus?
Aussies are predicted to spend $30 billion this festive season. Here's 7 key tips on how you can save on gift-buying.
Access deals and discounts of up to 65% off laptops from Dell, Microsoft, HP and more in the 2023 Cyber Monday sale event.
Upgrade your home office this Cyber Monday with 35% off ergonomic standing desks from Omnidesk.
If you're looking for iPhone deals in this year's Cyber Monday sales, check out our roundup of the very best discounts around.
Can you get a red-hot deal for the red centre?
11% of us are putting our holiday shopping on plastic.
From cutting-edge gadgets to deluxe mattresses, these are the best Black Friday deals you can get over the weekend.
we are wanting to remodel our home. what loan would be good for us?
Hi Shelly,
Thanks for your question.
I am not able to recommend a specific loan to you as the best loan will depend on how much you are looking to borrow, your financial situation, what you are eligible for, etc. To remodel your home, you can use an unsecured personal loan or a home equity loan which secures the loan amount against the equity you hold in your home and gives you a lower rate. Once you have found a loan you are eligible for and that you want to apply with, select ‘Go to Site’ to find out more and submit your application.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.
I hope this has helped.
Thanks,
Elizabeth
is there an organisation i can talk to that would go through all aspects with me on the phone to make sure i’m making the right decision on a personal loan
Hi Steve,
Thanks for your question.
While we are unable to provide you with personal advise, you might be interested in the services of a financial planner.
Cheers,
Shirley