The term variable loan describes a loan with a variable interest rate. Variable Loans in the Credit Encyclopedia – Explanation and Explanation The term variable credit is used in banking for two different contexts. On the one hand, the term variable loan refers to a loan with a variable interest rate. In this case, the variable interest rate is based on the respective money and credit market and is not set to over for the entire duration. In the case of a floating rate loan, the interest rate is fixed between 1-6 months, depending on the contract, and adjusted to current market conditions at the end of the fixed interest period.
This loan can have both advantages and disadvantages: for the end lender. If the interest rate increases after the end of the commitment period, the loan becomes more expensive. If the interest rate drops, the loan will be cheaper. At a very low interest rate level, variable interest rates do not pay for themselves, in which case the fixed interest period should be set longer and the longer the maturity.
High interest level
When the interest rate level is high, the interest rate itself may pay off as there is a likelihood that the interest rate will fall and the high yield will not have to be overpaid over the entire period. On the other hand, a variable loan is a loan, the amount of which is not fully paid out but can be used variably by the loan.
If a loan amount of EUR 50,000 is decided, this EUR 50,000 will not be paid in one amount, the borrower can divide it according to his own needs. Only interest is paid on the amounts borrowed by the borrower. The variable loans offer great flexibility but, unlike other forms of financing, are quite costly as banks can be paid flexibility in the form of higher interest rates.
In this case, the house bank must provide the full 50,000 EUR, can not handle this amount, so do not know if the borrower also receives the loan amount. Now there is also the possibility to combine both connections, in a variable loan with a variable interest rate. The call credit is offered in this case with a variable interest rate.
With the call credit received the loan applicant usually consists in the possibility not only to take the loan in a variable amount, but also to delete. Special repayments are usually granted free of charge and the balance can be repaid faster.