how to calculate fixed interest costs
calculating fixed interest costs for a loan is relatively simple you just need to know remember that your credit scores and income can influence the rates you pay for loans regardless of whether you choose a fixed or variable rate option online loan calculators can help you quickly and easily calculate fixed interest rate costs for personal loans mortgages and other lines of credit fixed vs variable interest ratesvariable interest rates on arms change periodically a borrower typically receives an introductory rate for a set period of time often for one three or five years the rate adjusts on a periodic basis after that point such adjustments don t occur with a fixed rate loan that s not designated as a hybrid 2in our example a bank gives a borrower a 3 5 introductory rate on a 300 000 30 year mortgage with a 5 1 hybrid arm their monthly payments are 1 347 during the first five years of the loan but those payments will increase or decrease when the rate adjusts based on the interest rate set by the federal reserve or another benchmark index if the rate adjusts to 6 the borrower s monthly payment would increase by 452 to 1 799 which might be hard to manage but the monthly payments would fall to 1 265 if the rate dropped to 3 if on the other hand the 3 5 rate were fixed the borrower would face the same 1 347 payment every month for 30 years the monthly bills might vary as property taxes change or the homeowners insurance premiums adjust but the mortgage payment remains the same fixed rate loans can be counted on whereas there s always a bit of uncertainty associated with variable interest rates advantages and disadvantages of fixed interest ratesfixed interest rates can offer both pros and cons for borrowers looking at the advantages and disadvantages side by side can help decide whether to choose a fixed or variable rate loan product fixed interest rates provide consumers with some degree of predictability this means that your monthly loan or mortgage payments remain the same for the lifetime of the loan even if conditions change and rates go up your rate remains the same as such you won t have to budget for increases in your payments later on down the road 