Would you opt for a guarantor loan fixed rate or adjustable rate? The former is always a better proposition. Let us explore the reasons why. Read on through this article to find out how you can get approved for a new guarantor loan with a fixed interest rate.
The principal difference between a guarantor loan fixed rate and variable or adjustable rate is the fact that the latter can be reviewed from time to time. Some lenders conduct a yearly review, some do so half yearly and there are instances when lenders can suddenly change the rate of interest one month and you would get a notification of the same.
The biggest advantage of adjustable rates is the element of possibility that you could be paying a lower rate of interest sometime in the future which can save you some money.
Guarantor Loan Fixed Rate
Who wouldn’t want to save some money and all the more if you can save some from the repayment you are obliged to make? That is like a bonus. But wait till you know the full story as an adjustable rate is not a surefire promise.
It is not as if your rate of interest will possibly get reduced in the near future or sometime during the repayment period. There are more chances of the rate surging northward than taking a nose dive. A fixed rate is what it is and you would always pay the same interest and the same installment throughout the term.
That is the biggest advantage of a guarantor loan at a fixed rate. Fixed rates of interest have absolutely no connection with anything so you are assured of the installment amount and steady repayment.
Adjustable rates are so designed to allow lenders the luxury to increase or decrease the rates of interest depending on the economic condition and how the central banks are lending money to various financial institutions.
In reality, adjustable rates are used as a camouflage for marketing. Lenders often reduce the rates to woo borrowers and then when they have paid the installments for a few months or a year, the lender increases the rate of interest.
This has nothing to do with the policies of the central bank or the macroeconomic scenario. There have been instances when lenders have increased rates during recession which is a time one must reduce rates of interest.
From whichever perspective you look at it, a guarantor loan at fixed rate is the wise choice, unless you are absolutely certain of the fairness of the lender and know for sure that you would save money with an adjustable rate.