Payday loan: fixed rate or variable rate?

The conditions of consumer credit can vary from one credit to another, whether it is a bank loan or a loan between individuals. The greatest attention to the rate of the loan is required for signing a payday loan: it is he who largely determines the cost of credit. Two proposals are then available to the borrower: the fixed rate and the variable rate. an elucidation on http://www.dawncities.com/can-i-refinance-a-car-loan-with-bad-credit-get-an-easy-car-loan-for-bad-credit/

PAYDAY LOAN AT FIXED RATE: THE MOST STABLE

PERSONAL LOAN AT FIXED RATE: THE MOST STABLE

The fixed-rate is by definition invariable, it has many advantages for those who prefer stability:

  • the rate that appears on the credit contract at the time of signing remains the same throughout the duration of the payday loan;
  • the fixed rate makes it possible to repay equivalent maturities each month;
  • the fixed rate provides significant repayment stability for a long-term payday loan;
  • the overall cost of consumer credit is known upon signature;
  • the fixed rate makes it possible to block a lower rate in the event of fear of increasing interest rates later.

In return, in the event of a fall in interest rates on the markets, the borrower who has chosen a fixed rate for his consumer loan cannot benefit from this reduction.

THE VARIABLE RATE: THE MOST FLEXIBLE

THE VARIABLE RATE: THE MOST FLEXIBLE

 

The variable rate differs from the fixed-rate since it follows market fluctuations. The rate is indexed to indicators that can modulate it upwards or downwards. The flexibility that has its advantages:

  • in the event of a fall in interest rates, the borrower thus pays lower monthly payments than what was initially planned;
  • The cost of borrowing can be very attractive in the case of a short-term loan at a time when rates are falling.

Conversely, however, if rates rise, so do the monthly payments, and the cost of the loan can be very high. The borrower can then, if he wishes, make an early repayment to avoid continuing to suffer the increases.

The last possibility is offered to the borrower, it is the capped variable rate. The rate then remains variable, but within a predefined range. For example, a rate capped at one point cannot fall or increase by more than 1%.

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