Variable Interest Rate

A variable interest rate is a loan or mortgage interest rate that fluctuates over time based on an underlying benchmark or index, such as the prime rate or LIBOR. Unlike fixed rates, variable rates can increase or decrease, affecting the borrower’s monthly payments. While variable rates can offer lower initial rates, they carry the risk of future rate hikes. 

Understanding variable interest rates is crucial for assessing the impact on loan affordability and advising borrowers on potential financial risks.