Fixed Rate vs. Variable Rate
Navigating the loan process can feel intimidating, and ensuring that you lock in a loan rate that aligns best with your financial goals is vital. Whether you are considering a mortgage, purchasing a new car, or applying for a credit card or personal loan – understanding the differences between fixed versus variable rates is crucial in making a decision that works for you.
What is a Fixed Rate?
If you are looking for a stable and reliable monthly payment – a fixed rate is for you! Fixed refers to something that “remains constant and unchanged.” In terms of a rate, this means throughout the life of your loan, the rate will remain constant and unchanged. Choosing a rate with a fixed term is advisable for someone who wants to budget their monthly payment and not worry about changes to their rate over time.
What is a Variable Rate?
Unlike fixed rates, variable rates can change throughout the life of your loan based on market conditions. Variable rates are often linked to the prime rate set by the Federal Reserve. As the fed raises or lowers the prime rate, so do the linked rates. Many find these rates more appealing because they offer a lower rate for the initial term. For example, with our 10/1 Adjustable Rate Mortgage (ARM), you receive a fixed rate below the standard rate for 10 years. This is called the introductory period. After that the rate increases or decreases once a year. These rates are much more dependent on the market, but can often provide a better deal.
Selecting between a fixed rate or variable rate is a highly individualized decision based on your financial goals. We are always working to provide the best rates for our members and want to see our members succeed. Our team of lending experts and branch staff is here and ready to guide you through this decision-making process, ensuring that you feel assured and well-informed to make the best choice for your circumstances!
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