Definition
An interest rate that can fluctuate over time based on market conditions, potentially affecting your loan payments.
What to consider
- Be aware that your payments might change as rates fluctuate.
- Plan your budget with the possibility of rate increases in mind.
- Monitor market trends to see if refinancing is a good idea.
Real world scenarios
- Rob’s credit card has a variable APR tied to the prime rate. He checks his statements frequently to monitor changes in monthly interest costs.
- Cynthia’s adjustable-rate mortgage starts with a lower initial rate but resets after five years, requiring her to plan for possible higher payments later.
- Tracking variable rates helps Paul decide whether refinancing to a fixed loan would save money long term.
Related terms
Related Playbooks
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