Vehicle loans are the one of the most common forms of financing. Terms may be as short as a couple of years or last for as long as six years. One of the decisions the buyer must make has to do with the type of interest rate. While a fixed rate installment loan is more well-known, it’s possible to secure a truck loan with a variable interest rate.
This article will explore the following:
What is a Fixed Rate Loan?
A fixed rate loan comes with a interest rate that will not change for the duration of the loan term. That rate is identified in the loan provisions and remains in effect until the debtor settles the obligation or chooses to roll the existing loan into a new one. Many lenders calculate the monthly installment payments so that more of the interest rate is paid during the first year or two of the truck loan. After that, more of each monthly installment payments goes to settle the principal.
What is a Variable Rate Loan?
Variable rate loans are structured much like their fixed rate counterparts. The difference is how the rate of interest is calculated and adjusted during the life of the loan. With a variable rate arrangement, the first year or two will carry a fixed rate. After that, the interest rate will fluctuate based on the current national average.
Pros of Fixed Rates
Fixed rate truck loans provide benefits that many consumers find attractive:
Pros of Variable Rates
Variable interest rate loans also offer advantages that attract those seeking to finance truck purchases:
The options for auto and truck loan financing are more versatile than many consumers realize. Choosing to work with a provider who offers access to multiple lenders through a directory increases the odds of finding the right lending arrangement. Instead of assuming that dealer financing is always the best choice, compare the terms with those offered by other lenders. Doing so could save a great deal of money over the life of the loan.