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Fixed or variable rate on personal loan?

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  • 04-08-2014 11:46pm
    #1
    Darkest Horse
    Registered Users Posts: 497 ✭✭


    Hi all. Any advantage in one or the other on a personal loan? Just not quite sure which is the best option at this point I'm time though I'm told interest rate hikes on a 10k loan won't dramatically affect the monthly repayments. Any help appreciated.

    DH


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    #2
    GerardKeating
    Registered Users Posts: 7,652 ✭✭✭GerardKeating


    Darkest Horse wrote: »
    Hi all. Any advantage in one or the other on a personal loan? Just not quite sure which is the best option at this point I'm time though I'm told interest rate hikes on a 10k loan won't dramatically affect the monthly repayments. Any help appreciated.

    DH

    A Fixed rate "protects" you against the interest rate rising during the term of the loan, but this protection comes at a cost, the rate will be slightly higher than the variable rate at the time you take out the loan, and there will normally be penalties for clearing the loan early. Also if the rates fall, you do not benefit.


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    #3
    Darkest Horse
    Registered Users Posts: 497 ✭✭Darkest Horse


    GerardKeating wrote: »
    A Fixed rate "protects" you against the interest rate rising during the term of the loan, but this protection comes at a cost, the rate will be slightly higher than the variable rate at the time you take out the loan, and there will normally be penalties for clearing the loan early. Also if the rates fall, you do not benefit.

    That's great, which would you recommend?


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    #4
    jameshayes
    Registered Users Posts: 3,772 ✭✭✭jameshayes


    Darkest Horse wrote: »
    That's great, which would you recommend?

    its a gamble, you've to make the call yourself. I always go variable - but I've been stung with rate rises in the past..


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    #5
    Darkest Horse
    Registered Users Posts: 497 ✭✭Darkest Horse


    jameshayes wrote: »
    its a gamble, you've to make the call yourself. I always go variable - but I've been stung with rate rises in the past..

    How stung? :)


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    #6
    RebelButtMunch
    Registered Users Posts: 2,383 ✭✭✭RebelButtMunch


    Go variable. Fixed is only lining the pockets of the bank.


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    #7
    coylemj
    Registered Users Posts: 25,437 ✭✭✭✭coylemj


    RebelButtMunch wrote: »
    Go variable. Fixed is only lining the pockets of the bank.

    Loans at fixed rates allow the banks to issue bonds at fixed rates (over a given number of years) to savers, that's why there's a penalty for paying the loan off early.

    OP, you left out an important fact which has a major bearing on the decision to go fixed or variable - the loan duration. If it's four years or less I'd go variable.

    Even on a four or five year loan, if rates start to go up in three years, you'll still be ahead and at that stage you may have spare cash to pay the loan off early to avoid the higher rates.


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    #8
    GerardKeating
    Registered Users Posts: 7,652 ✭✭✭GerardKeating


    Darkest Horse wrote: »
    That's great, which would you recommend?

    If I knew what the rates would be in 3/4 years, I would not be on boards posting :)

    Rates seem to be low and not showing much inclination to rise in the short term, so variable seem (for a 2/3 year) loan the better option, but it is a gamble...


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