When it comes time to choose a loan, it is important that you know what type of interest rate it has. Since this will allow you to know if your installments will increase over time or not.
Variable Rates
Variable rates are directly linked to inflation. This concept refers to the increase in the prices of goods and services, in a sustained and generalized manner over time. Explaining it in more detail we can say that by inflation we understand the constant increase in prices of most products in general. If only one product increased, we would not be talking about inflation.
How does this impact?
Variable rates are managed by inflation rates. The more it rises, the higher your fee will be, since the financial institution decides to increase it to compensate for the rise in prices.
The problem is that not only does your fee go up, all your other expenses also go up, and many times your salary does not keep up with these increases. That is why it is important to check how much your fee can increase, to see if you will be able to pay it.
Fixed Rates
On the other hand we find fixed rates. That is, your quota will always remain the same. Since from the moment you take out the loan, its interest rate is frozen.
Why is a fixed rate best for you?
Because you know that no matter what happens to the country’s economy, you will always be paying the same. In addition, as the months go by, the fee will become lighter since your income will increase as a result of adjustments for inflation.