Credit repurchase: fixed rate and variable rate
In the world of credit consolidation, there are two main categories of interest rates: the fixed rate and the variable rate. Each rate has its advantages, its limits and its characteristics that we will detail for you.
Redemption of loans and interest rates
Whether you are a lender or a borrower, the interest rate represents the cost of the loan. For a borrower, it determines the amount that must be paid to borrow money and for the lender, it represents the remuneration received in case of loan of money.
In other words, the interest rate is the remuneration for a service, the credit. However, there are mainly two types of interest rate in the context of a loan or a grouping of loans (real estate, consumption).
Fixed rate credit consolidation
Today, the majority of loan consolidations granted by the country include a rate fixed interest. It is a peculiarity of the credit market which is thus one of the least risky.
This type of rate is fixed and fixed contractually by the lending institution. Its level and terms are clearly indicated in the specific conditions of the credit offer.
Thus, throughout the repayment term credit, the bank or institution lender will not change the interest rate. Real security for the borrower who knows in advance the exact cost of his credit.
Why choose a fixed rate?
In the context of a repurchase of credit, some borrowers may be advantageous to choose a rate fixed interest, which is the rate used by borrowers .
This type of rate offers perfect security to the borrower; it is the preferred rate so as not to have any surprises. It not only allows the borrower to freeze the cost of his loan, but also to know exactly the amount of his future maturities over the duration of his loan.
Nevertheless, the choice of this rate should depend on the level of the rate of interest and the economy because, in case of falling, the rate of interest fixed could cost more compared to the rates offered on the market.
Variable rate credit consolidation
In the world of credit repurchase, the variable rate at a small proportion, it is often offered for medium-term loans and to wealthy borrowers.
This rate is composed of an index reference and a margin. In addition, the variable interest rate can be increased or decreased. This avoids a sudden increase resulting in the insolvency of the borrower.
Why choose a variable rate?
A rate of departure competitive to that of credit at rates fixed and the opportunity to enjoy the possible cuts rates are the main advantages of rate variable in the consolidation credit.
This rate is particularly advantageous in a situation favorable, it follows the changes in indexes of reference and amounts deadlines are adjusted accordingly every month or every quarter.
In the repurchase of credit, this variable rate is recommended only to the borrowers who have a good margin of maneuver concerning their finances. In other words, borrowers capable of paying off credit in the event of a sharp rise in rates.