Every loan forces one choice: fixed rate or variable rate? The variable rate looks a little lower today, but a few years out, fixed feels safer… it's not obvious. Here's the difference and how to choose.
Curious which costs less overall? Put each rate into the loan calculator to compare monthly payment and total interest.
Fixed rate — locked to maturity
Your rate is fixed for the whole term. No matter how high market rates climb, your payment stays put. For that peace of mind, the starting rate is often a bit higher than variable.
Variable rate — moves with the market
Tied to a benchmark (like COFIX), it usually resets every 6–12 months. It starts lower, but if rates rise, your payment rises too — and falls if rates drop.
Hybrid (fixed then variable)
Fixed for the first few years (e.g., 5), then variable — a middle ground common in mortgages.
How to choose
- Rising-rate environment → fixed to block the risk.
- Falling-rate environment → variable to enjoy lower interest.
- Longer term → fixed for predictability (a 30-year mortgage benefits from stable payments).
- Tight budget → fixed, to avoid a sudden payment jump.
Even on a variable loan now, you can later refinance to better terms. Your first choice isn't forever.
FAQ
Which is better right now?
No one can promise where rates go. What's certain: if a payment jump would hurt, fixed is safer.
How often does variable change?
Often every 6 or 12 months — check the "rate reset period" in your contract.
There's no universal winner. Decide by "can I handle it if rates rise?" and compare both scenarios in the calculator.
This is general information, not a product recommendation or financial advice. Rates and terms vary — confirm with your lender.
