variable interest rate
banking
Quick Summary
A variable interest rate is a rate that can change over the life of a loan. These rates are tied to a benchmark, such as a bank's prime lending rate, meaning any changes to that benchmark will affect the loan's interest rate. Loans with variable rates include adjustable-rate mortgages (ARMs) and credit card debt. While variable rates can be lower than fixed rates initially, they pose a risk of increasing costs if interest rates rise significantly. This can lead to higher monthly payments and increased overall interest paid.123
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