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< Financial Dictionary
Variable Rate Interest
A variable rate credit agreement, as distinguished from a fixed rate
agreement, calls for an interest rate that may fluctuate over the life
of the loan.
The rate is often tied to an index that reflects changes
in market rates of interest.
A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary.
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