❄12 Days of B&W Finance - Day 2❄
Hope you’re all getting into the festive spirit and looking to end 2019 with a bang! In keeping with our ‘12 Days of Black & White Finance’ theme, today we will be looking at the differences between fixed vs variable rates.
"On the second day of Christmas, Black and White Finance gave to me: two different rate options,
- And a head start on my first home"
Tell me about fixed rates
The easiest way to explain fixed rates is that they just don’t change.
Fixed rates are usually set in place for a specific timeframe, i.e. 1, 2, or even 5 years.
There are many reasons people opt for a fixed-rate loan, for example;
Making budgeting easier – If you know how much your repayments will cost you every month, it makes saving for the future a much easier process provided you know how to budget correctly.
Say goodbye to rate rises – If the rate ever rises above what you originally signed on for have no fear, your fixed-rate is in place to prevent this and give you peace of mind.
Tell me about variable rates
Variable rates, on the other hand, mean that the rate in which you make your repayments on can fluctuate depending on changes to market interest rates.
“But why would I ever want such uncertainty in my life?”
Well, good question!
There are a number of reasons why variable rates are favourable, these include;
More Features – Variable loans can give you access to features you can’t otherwise get like being able to save on interest by setting up an offset account or having unlimited redraws on your additional repayments.
Make extra repayments – A variable rate loan will allow you to make extra repayments at no added cost meaning more money in your pocket!
Taking advantage of rate reductions – Oh what’s that? The RBA has cut interest rates again? (CHA-CHING) That’s more money you saved directly as a result of being on a variable loan.
They both sound good, is there a middle-ground?
Just like on Christmas eve when you aren’t sure if you should put out cookies for Santa or carrots for his reindeer and you suddenly realise, why not both?
Fixed and variable rates are the same!
Some people take advantage of the benefits to both by doing what’s known as ‘loan splitting’, in this you can split your loan into segments and pay fixed on 1 or more segments and variable on the others.
Splitting is generally a good option for most people who have seasonal work or are self-employed and don’t have the same annual income each year.
Final Thoughts
There are really a lot of options out there when it comes to how you want to set up your loan repayments.
Everyone is different and we at Black & White Finance take everything into consideration on a case-to-case basis, a lot like Santa reviewing his naughty or nice list (though I’m sure you’ve all been nice, right?) but without his horrible wait times!
Regardless, whatever your situation, if you want to pay off your loans sooner or just have that peace of mind for your monthly deductions, come have a chat with us and let’s do what is best for YOU and go into 2020 with confidence!
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0448 890 186
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We’re also keen to receive your questions and if you want to know of some other great terms or rates on offer at the moment, and would rather email, please send a note to peter@blackandwhitefinance.com.au
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