What are the Difference between Fixed and Variable Loans?

 

The term variable is usually associated with the interest rates on a a loan that keeps changing over time, but many lenders have started using the term 'variable' with the personal loan to distinguish it from a fixed-term loan.

 

A flexible or variable loan is a type of short-term loan with no fixed the term where a lender allows you the flexibility of repayment and sometimes the ability to re-borrow the cash up to a predefined set limit. Many private online leading platforms such as Flexi loans offer this type of variable credit loan in the form of instant paperless loans in Canada.

 

Key points of Difference Between a Fixed and a Variable loan

 

Flexible Repayment schedule

 

A traditional fixed-term loan has a predefined schedule in which a loan is repaid in scheduled, periodic, and fixed payments. On the other hand, a flexible loan has no fixed term. You can pay off the loan faster without any penalty. If you have a shortage of money, you can postpone the next payment date by paying the minimum due amount that includes the part of your loan and interest rate. 

 

Ability to borrow the money 

 

Flexible loans allow you the flexibility to use the funds like credit cards. You can reborrow the money as per the set limit defined by the lender once the part of the loan is paid off. Many private lending platforms offer payday loan alternatives that allow you to renew your loan.          

 

No penalties on prepayment 

 

Flexible loans do not incur penalties on prepayment of a loan. If you get a cash advance, you can repay the entire amount of the loan without any penalties in a single payment. A fixed-term loan does not give you the freedom to repay the loan in advance. 

 

These were key points of difference between a fixed-term loan and variable loans.