Exploring Interest Rates: Fixed vs. Variable

What is the primary function of an interest rate in the context of loans?

• To record the transaction details

• To provide insurance on the borrowed amount

• To calculate the extra amount paid over the borrowed sum

• To determine the repayment time

How does a variable interest rate differ from a fixed interest rate?

• It is always higher than fixed rates

• It offers less predictability in monthly payments

• It fluctuates based on financial market changes

• It remains constant throughout the loan period

What could be a potential benefit of choosing a variable interest rate for a loan?

• Fixed monthly payments

• Higher initial rates

• Less predictability

• Lower initial rates which might save money

Why might someone prefer a fixed interest rate on a loan?

• Initial rates are lower than variable rates

• The rate can decrease based on market conditions

• It changes frequently, providing flexibility

• Predictable monthly payments facilitate easier budgeting

Which type of interest rate remains the same throughout the life of the loan?

• Variable interest rate

• Flexible interest rate

• Adjustable interest rate

• Fixed interest rate

What should you discuss with your student loan lender to make an informed decision?

• Only the benefits of variable interest rates

• Repayment schedules only

• Options between variable and fixed interest rates

• Only the benefits of fixed interest rates