Most people have heard the terms “fixed rate” and “variable rate,” but do you really know the difference between the two – and how it can save or cost you big money in the long run? If you’re shaking your head no, today’s blog post is for you. We’re going to clear up the mystery and share a tool that can help you get a clearer picture of your payments.
Why Interest Rates Matter
Your interest rate is the amount a lender charges to use money. It is expressed as a percentage of the principal, the original amount borrowed. As the name suggests, variable rates vary over time. They may shift depending on factors like inflation, the market index, unemployment rates, economic activity and more. Fixed rates, on the other hand, are a set as a certain percentage of the loan. They don’t change over time. When you sign on a fixed-rate loan (like a World loan), you know exactly what you will pay in interest and there are no surprises.
When shopping for a car or a home, you may discover that the estimated monthly payment often fails to factor in interest. That may not seem like a big deal, but interest can significantly increase the amount of your monthly payment.
Enter the Interest Calculator
If all this math seems overwhelming, don’t panic. We’re about to introduce you to a convenient tool for estimating your monthly payments. Meet the interest calculator.
While shopping for a loan or planning a major purchase, it’s always a good to use an interest calculator to determine the actual payment you will be required to make, including any interest. By doing so, you are better able to determine a payment that works for your income and budget.
Ready to go give it a go? Click here to open the interest calculator.