Boat Loan | Fixed and Variable Rates
DEFINITION of 'Fixed Interest Rate'
An interest rate on a liability, such as a boat loan or yacht loan, that remains fixed either for the entire term of the loan or for part of this term.
A fixed interest rate may be attractive to a borrower who feels that the interest rate might rise over the term of the loan, which would increase his or her interest expense.
A fixed interest rate, therefore, avoids the interest rate risk that comes with a floating or variable interest rate, wherein the interest rate payable on a debt obligation depends on a benchmark interest rate or index.
DEFINITION of 'Variable Interest Rate'
An interest rate on a boat loan, yacht loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically.
The obvious advantage of a variable interest rate is that if the underlying interest rate or index declines, the borrower's interest payments also fall. Conversely, if the underlying index rises, interest payments increase.
Along with Fixed and Variable Rate Financial Programs We Offer: