Archive August 7, 2019

Fixed rate or floating rate on loans?

Should you choose fixed rate or floating rate on your loan? Many people wonder about this every year. Here are some thoughts on this.
In relation to the loan rate, you basically have two options. You can choose either a fixed rate or a floating rate.

Fixed rate on loans

Fixed rate on loans

With a fixed interest rate, you are certain that the interest rate will remain the same throughout the loan term. On the road there is no danger that you suddenly have to pay a higher monthly repayment. The fixed interest rate gives you greater security and greater security if your financial situation does not allow for interest rate increases.

The disadvantage is that with a fixed interest rate you will have to pay more for the loan when it comes to a period of up to 10 years. The fixed interest rate is thus generally higher than variable.

Floating interest rate on loans:

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For many, the main advantage of floating interest rates is that they will have a lower interest rate if interest rates move down.

With so-called floating interest rates, this means that you have a variable interest rate. This means that the interest rate is adjusted to market rent, either once a year, once every three years or once every five years.

You should consider whether your daily finances are safe enough to cope with the fact that the monthly payments on your loan can increase.

Floating interest rates on your loan

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Another benefit of choosing floating interest rates on your loan is that these have historically been cheaper than choosing a fixed interest rate loan – if you look at it in the long term.

On the other hand, if you choose a variable interest rate, you have the option of setting an interest rate peak that guarantees that the interest rate – and thus your monthly payment on the loan does not exceed a certain amount.
Want to read more about fixed and floating interest rates?