Get Aware Of the Pros and Cons of Fixed and Variable Rate Car Loans
You might have frequently come across the terms such as fixed rate and variable rate car loans. What is more important is to understand these terms before going for any of them. Fixed-rate car loans are those where the interest rate on your loan does not change over the life of your loan while those with variable rates are those where the interest rates on your loan can change.
There are factors that you need to consider while deciding for any of these car loans, such as –
- If you are willing to lock down your interest rate for the whole term of the loan, you must go for fixed rate car loan. It is definitely a great idea to consider your personal budget first.However, you need to take care that some fixed rate car loans come with early termination fees if the loan needs to be finalized before the agreed term.
- If you are willing to go for variable rate loan, it will allow the lender to change the interest rate where it can fluctuate with the market.With these car loans, it will be a bit difficult to maintain your expenses on your personal budget.
- If you are planning to pay off the loan early, then it is better to have a variable rate car loan as the lender has the ability to change the interest rates with their economic costs. If the car loan was terminated early, there would be minimal cost that will add to its advantage.
- Moreover, the early termination fees associated with the fixed rate car loans is not quite large which can make it more appealing. However, the variable rate unsecured loans come with more flexibility, though with higher interest rates.
It is time for you to make a call which type of car loan suits you the best after consulting the lenders or the banks.