When you need money fast, one of the most convenient decisions that you can make is to opt for a personal loan. This will give you the money you need for an emergency, to renovate your home, vacation, or anything else.
As you search through the best personal loans, you will notice that there are two types; fixed-rate and variable rate. But what is the difference between the two and which one is the best for your lending needs?
What is a Personal Loan?
A personal loan is simply an amount of money that you can borrow from a lender to use for different reasons. Many individuals will use it to plan for a wedding, go on vacation, pay to renovate their home, and consolidate debt to make it easier to pay off.
There are many reasons why someone would choose to get a personal loan. This can help them get their finances in good shape and saves a lot of hassle when working with creditors. Before you pick the personal loan that you would like to use, doing a thorough personal loan comparison is going to be important.
What is a Fixed Rate Loan?
As we can see in the name, a fixed-rate loan is going to have an interest rate that stays the same from the moment you take out the loan until the loan is paid off. This can help you to know how much you owe each month and there will never be any changes in the monthly payment at all.
There are a few benefits of choosing a fixed-rate personal loan. The first is that the payments will be the same each month. This helps you to budget for all the expenses of the debt each month. You can also set up automatic repayments that will just take the money out of your account without any more work from you. This will make it a great choice without you having to actively remember your financial obligations.
There are a few negatives to these loans. If you wish to pay off the loan early, there can be fees for doing this. You will need to look at the fine print of the loan documents to see if these penalties are there. And if the rates go down, you will not get to take advantage of this.
What is a Variable Loan?
Another option that you can choose is a variable rate loan. With these, the rate can change during the terms of the loan, going either up or down. There are a few benefits of this. You will have fewer repayment costs, allowing you to pay off the loan sooner without some of the fees of the fixed-rate loans.
Many borrowers like the flexibility that comes with variable rate loans. You can pay off early or even use the available funds more like a line of credit compared to the fixed loan, as long as you do it responsibly.
The biggest drawback is that interest rates can go higher. With the fluctuations, it is already hard enough to know the exact payment each month. If the rates start to go up, you will be stuck paying more on the loan than you were planning.
When choosing a personal loan, the right lender and the right rate will make all the difference. Instead of wasting time looking for the best rates from many different banks, choose iSelect to help. At iSelect, you will be able to look at all the variable and fixed-rate loans that are available, based on the information that you submit online.