Most unsecured and secured loans have a fixed monthly repayment amount for a certain length of time, and some have a variable amount that might change from month to month. Consumers can choose from fixed rate loans and variable rate loans when selecting which type of loan would suit their circumstances.
Fixed rate loans require a set amount of money to be paid every month for the full term of the repayment period. This can allow the consumer to budget their monthly spending and know exactly what the repayment amount will be every month.
With variable rate loans the interest rate will change from month to month which means you could be paying more or less each month in interest charges. This is much riskier as it depends on the Bank of England base rate to the changes that might be applied to the loan. This could be a good thing if the interest rate goes down, as your monthly repayments would also do the same. This might be a better way to save more money when getting a loan, but much riskier.
Compare APR’s from leading loan lenders with our loans comparison table.