Fixed rate car loans are the most widely available option for financing, and deliver a reliable long-term picture of repayment terms. In contrast to variable rate car loans, which fluctuate based on any changes in interest rates for the entire length of your loan, fixed rate car loans are set at one specific interest rate from the time they are taken out. When compared with variable rate car loans, fixed rate car loans have a number of aspects that can make them a much more preferable choice to someone who prefers certainty in the repayment amount over the term of the loan.
A fixed rate car loan through NuStart Finance keeps your repayment amount exactly the same from the first repayment to the last, allowing budget-conscious drivers to see exactly how much they’ll be paying from month to month. Borrowers can also calculate the total cost of repayments by multiplying the monthly payment by the number of payments, giving a clear picture of the total amount to be repaid. Variable rate loans may change over the term of the loan and based on interest rate changes this will affect the repayment amounts advised by the lender.
Set Interest Rate
Where variable rate car loans allow lenders to adjust interest rates on a loan, a fixed rate car loan guarantees a specific rate for the entire repayment period. This can prove advantageous in the event of interest rate increases where the fixed rate is lower as lenders often use federal interest rates as a guideline for determining their own. This means a hike in interest rates nationally can have adverse effects on the cost of repaying a variable rate loan.
Fixed rate loans are an excellent choice for those with a regular income who want certainty in repayment amounts over the term of the loan, and they can be particularly smart options during times when federal or lender interest rates are relatively low with a potentially lower rate locked in. They can also be a much better option for loans with longer terms, as variable rate loans can be unpredictable over an extended lending period in a changing interest rate environment.
The majority of lenders offer the ability to make additional payments on a loan in an effort to pay it off ahead of schedule. Each option works to reduce the total term of your loan and save hundreds on interest by reducing the principal. There may be an early repayment fee associated with a fixed rate loan but the savings in total repayment typically offset any surcharges. To find out more about early repayments you can speak to the lender directly or read your credit contract.
Fixed-rate car loans may not offer the periodically lower payments that variable rate loans do, and those who take out variable rate loans may even initially pay less for financing. Nevertheless, the predictable performance and clear repayment terms that a fixed rate loan can provide make it the more consistent choice, and that can mean substantial savings over time where interest rates increase rather than decrease over the term of the loan. It is important to consider your financing needs and objectives to determine whether a fixed rate loan is suitable to you.