A loan with a fixed rate can be perfect for some people depending on their circumstances, while it can be a choice to avoid for others.
Perhaps the best thing about a fixed rate is that your loan repayments are always predictable. This can make budgeting and planning your finances easier, with the same repayment amount every week, fortnight or month for the period of your fixed rate term.
If it’s a personal loan, it will usually be fixed for the duration of the loan, while fixed rate home loans offer a set fixed period (usually one, three or five years), at which point you can choose to revert to variable interest rate or discuss a new fixed term arrangement.
It can also be comforting to know that you’ve locked in a rate so that if interest rates rise, your payments won’t increase.
However, fixed rates also come with a lack of flexibility; they may not allow extra payments to be made, and paying a loan off early can incur a sizeable fee. Fixed rate home loans also may not come with a redraw facility.
There is also the risk that interest rates could drop, making your fixed rate higher than the market variable rate.