Fixed Rate Loan Advantages

2008-09-26 11:38:58

( Financial )



If you are planning to get a loan or maybe trying to consolidate your loans, you may have encountered the term fixed rate loan. This exactly means what it is. The interest rate would be fixed for an agreed upon period. Fixed rate loans are common in mortgage loans can also be available in car loans and other types of loans.

There are advantages to a fixed rate loan as it protects you from highly fluctuation interest rate. A fix rate loan will allow you to compute well in advance how much you will paying in interests unlike in non-fixed rate loans where you'll never know what interest rate will be applied at any given time. If the interest rates in fluctuation, it is best to apply for a fixed rate loan for your added security.

You can choose the length of time or number of years that you will agree to a fixed rate loan. It all depends on the bank and what you will eventually agree upon. But fixed rate loans are usually an option for most banks. Make sure you ask your banker if this option is available should you decide to use a fixed rate loan.

Sometimes a fixed rate loan can work to your disadvantage, however. This happens in situations when the interest rates are decreasing. You may not be able to take advantage of a lower interest rate if your in a fixed rate loan agreement. So make sure that you study the market first and do your due diligence to check what type of market your entering.

You can also opt to fix the interest rate in shorter periods of time so just in case the interest rates go down, you will have the option to get a better deal. That means you'll get lower interest rates.


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