Question

One Bank offers a 2% variable rate loan all competitor offers a 3% fixed rate loan over the same period it is likely better to choose the fixed rate loan even though the interest rate is higher because the rate on the 1. is open to fluctuations 2. variable loan appears less active 3. variable loan can increase dramatically 4. variable loan will never increase

Answer 1

The right answer for the question that is being asked and shown above is that: "2. variable loan appears less active." One Bank offers a 2% variable rate loan all competitor offers a 3% fixed rate loan over the same period it is likely better to choose the fixed rate loan even though the interest rate is higher because the rate on the variable loan appears less active

Answer 2

Answer: 1. the rate on the variable loan is open to fluctuations.

A variable interest rate loan is a loan with an interest rate that varies as market interest rates change. As a result, payments can change too. On the other hand, fixed interest rate loans are those in which the interest rate charged in the loan remains fixed for the entire term of the loan, no matter what happens with market interest rates.

The disadvantage that a variable loan has when compared to a fixed rate loan is that the variable loan is open to fluctuations in market interest rates. This uncertainty means that it is possible for your payments to increase in the future.