Are interest rates fixed or variable?

When you apply for a car loan, you have the option to choose between a fixed or variable interest rate.

It’s important to weigh up the pros and cons of both loan types so that you can make a decision that’s safest for your financial situation.

Fixed Interest Rate

Simply put, a fixed interest rate never changes, meaning your repayments remain the same for the life of the loan.


·       You know exactly how much your repayments are each month.

·       You can plan and budget with certainty, knowing your repayments won’t change.

·       You’re protected from future interest rate rises.


·   If the market interest rate falls, you pay more interest with a fixed rate.

·       Some lenders may insist upon a shorter lending period.

·       Fixed rate personal loans may not have a redraw facility.

·       If you want to pay back your loan early, you could be stung with a higher early repayment fee. But remember, Plenti will never charge you fees or penalties for paying your loan back early.

Variable Interest Rate

A variable rate rises and falls with the market interest rate as it responds to current economic conditions. This means you could end up paying more or less for your loan, depending on the market rate. 


·       If the market rate drops, you could pay less for your loan overall.

·       Most lenders offer longer repayment terms with a variable interest rate.

·       You may have the option to make additional repayments which could save you money over the life of your loan.

·       You may be able to redraw from any additional repayments you have made if you need some extra cash along the way.


·   If the market rate rises your repayments increase.

·   Interest rate rises are unpredictable and could make it harder to budget and make plans for the future.

Choosing between a fixed or variable interest rate is an important decision that could have a big financial impact down the track. Some people prefer the predictability of a fixed rate car loan, while others prefer the flexibility of a variable rate.

Financial comparison sites like Canstar, Ratecity, InfoChoice and Mozo can help you find and compare the best deals on car loans quickly and easily. Once you’ve decided on the best car loan for you, contact the provider. Don’t be afraid to ask them as many questions as you need to, until you feel satisfied that you’re ready to commit.

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