Advantages and disadvantages of a variable interest rate
When you compare the advertised interest rates for variable rate personal loans, keep in mind that what you see may not end up being what you get. If your lender cuts its interest rates, you may end up with lower monthly repayments than you initially budgeted for, leaving you with some surplus cash available.
While you may want to put these savings to use somewhere else, many variable rate personal loans also offer the flexibility to pay extra onto your loan, allowing you to get ahead of your repayment schedule, bringing you closer to fully paying off your personal loan and making an early exit.
However, it stands to reason that if interest rates on your personal loan can fall, they can also rise in the right economic conditions. Increasing interest rates can lead to more expensive monthly personal loan repayments, which can leave you short if you haven’t budgeted accordingly. This can make variable rate personal loans a bit more high-maintenance to look after than their fixed rate counterparts.