Fixed or Variable

Which is better?

This is a really common question. Fixed vs variable rates, which one is better? The short answer is, it depends on your situation, your cash flow, your current financial position and what you want to do in terms of achieving your financial goals.

The fixed loan can provide you with some security. In the instance where rates may rise, it gives you certainty around what your repayments will be, as it will remain the same during your fixed rate period. If you are a borrower who does not like to be locked into your repayment amounts, then the fixed loan wouldn’t be suitable for you.

The variable interest rate product may fluctuate during your loan term. The advantage is, if rates go down then so will the the interest charged on your loan, however if rates rise, the disadvantage is the interest charged will increase and therefore your loan repayments will go up.  Variable rate products also gives you the option to make additional repayments above what the minimum required amount.

It is also possible to have the best of both worlds. You don’t actually have to have one or the other. You can actually choose to have them both, and you can split the loan and have half of it fixed, and half of it variable or whatever percentage split that you feel is beneficial for you in achieving your goals.

The main thing to understand in regards to this is, these are just tools. They help you achieve your financial goals and depending on what stage you’re at, each tool will work differently for you.

Remember to speak to your broker, they will be able to give you an understanding which tool is going to be best suited for your situation right now in order to smash your financial goals.

The Growfinity team.